Malaysia Airlines CEO Wants To Unbundle Business Class

The IATA Annual General Meeting is in Miami right now, which is an event attended by almost all the “big wigs” in the airline industry. There’s always some interesting buzz which comes out of these, at least in terms of better understanding how airline CEOs think.

I don’t think there’s an airline in more of a transitionary stage than Malaysia right now, given that they’re under new leadership:

Malaysia’s new CEO, Christoph Müller, is one of the brightest guys in the airline industry, so when he talks I listen. And apparently he has been doing a fair bit of talking at the IATA AGM in Miami.

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Aviation Week has a good rundown of some of the things Malaysia’s CEO has been saying. First of all, he’s convinced that we’ll see more consolidation in Asia, as countries liberalize their air agreements:

Malaysia Airlines CEO Christoph Müller believes industry consolidation will happen much quicker in Asia than it has in Europe and the U.S.

Müller told Aviation Week at theInternational Air Transport AssociationAnnual General Meeting (IATA AGM) in Miami that he expects major progress in that regard within the next five years, as countries continue to liberalize their air service agreements and allow their national carriers to combine forces.

From a passenger experience perspective, though, it’s interesting to know what else he’s hoping to do. Not only is he hoping to make Malaysia more of a regional carrier, but he’s also hoping to make them more of a “value” carrier by unbundling services. He specifically mentions the possibility of offering business class tickets without miles or lounge access:

Müller sees MAS becoming a “value carrier” that will offer a basic product and optional high-end services. One of the key enablers of transformation will be a new information technology infrastructure that will allow the airline to offer more products and enhance back-office functions and processes, such as maintenance planning. “We will likely chose the revolutionary approach,” he said, and not try to adapt the current systems to new standards.

“We want to go modular so that people can build their own product,” Müller says. “Customers might book a business-class seat, but opt out of the miles or lounge access. Or they could take a day flight in economy to Australia and return in business overnight. Our current systems cannot deliver that.”

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That would be quite a revolutionary move, and I’m not sure how I feel about it. But like he says, Malaysia will likely choose the revolutionary approach when given the option, so I’d expect we’ll see a ton of innovation from them over the coming years. While we’ve seen many airlines unbundle economy seats, we haven’t really seen them unbundle business class, which would set a precedent for sure.

How do you feel about the concept of business class being unbundled?  

Comments

  1. now they want to nickel-and-dime the J class too ? what’s next, buy-on-board snack boxes for J ? Half-price J for a recliner but full-price J for the flat bed ? goodness

  2. terrible move… he has SQ next door and he wants to turn J into glorified cattle class? good luck with that…

  3. All airlines already do some form of price discrimination on J fares be it advanced purchase or upgrades for miles or cash. This wouldn’t really be that different. Not sure how much leaving miles and lounge out of the ticket would save but that’s not really the point. It’s providing a differentiated product to people who won’t pay the full price. If Malaysian can fill empty seats this way then good luck to them.

  4. It sounds like Muller is trying to turn Malaysia Airlines into the middle ground between AirAsia and Singapore Airlines.

  5. Not that I think MH is in a position to set precedent for the rest of the industry, but I worry when steps are taken that suggest that we are moving to a world where you don’t earn miles unless you pay extra.

    For me, miles are pretty much the only motivation I have to stay loyal to a single airline. Why would carriers want to take that away?

  6. This is great! Remember most people are interested in the cheapest business class seat possible. If they can save $500 (example) and not accumulate miles great! The miles industry is devaluating at such a high rate I do not see a reason to go out of my way to pay more on flights to collect miles. Just my two cents

  7. @AndrewB

    I earn so few miles from flying,that I pretty much don’t care what they do. CC miles OTOH, that rankles my feathers 😉

  8. Patricia wrote: “now they want to nickel-and-dime the J class too ? what’s next, buy-on-board snack boxes for J ? Half-price J for a recliner but full-price J for the flat bed ? goodness”

    I’m floored that someone would attempt hyperbole by listing these examples, since they’re both phenomenal ideas! The first would be of tremendous interest on a late-boarding redeye, where many passengers probably just want a comfy bed but don’t care about food. And the second already exists on some airlines: it’s called premium economy!

    As long as it’s transparent rather than punitive, unbundling is the best trend in modern consumer avaiation.

  9. Southeast Asia / Central Asia Pacific market is the most competitive market in the world. It’s a huge market, but too many strong competitors. Thai, Singapore, Malaysia and Cathay Pacific all have impressive products. However, it may turn out that only one of the SE3 (Southeast Asia Big Three: Thai, Malaysia, Singapore) can keep its A380. I guess Thai probably will lose their A380. Only Singapore can afford the A380 in that region.

  10. Maybe MH is trying to be the la compagnie of the East.

    But they need to be much more efficient than they are now, to bring their operating cost down.
    Maybe Airasia should do buyover MH, like what US Airways did.

    Airasia is much more efficient than MH.

    Budget Business class is good idea, but it needs to be at premium economy prices!
    (hey, if it is la compagnie budget style biz class at PE prices, MH will be very competitive!)

  11. Most commentary here seems to be from predominantly Business Class flyers of MH afraid of “enhancements”.

    I think you need to think about this from MH’s view, in that these ideas are not targeting existing Business Class flyers (who they’ll preseve benefits at current prices anyway) but rather in going after Economy Class flyers who could be upsold.

    Economy margins are thin, Business is where profitability can be found (because the hard and soft product always costs much less that what the airline charged). All that MH are looking to do here is segment Business Class a little to vary price (and increase demand) so as to obtain juicer margins from existing (and otherwise) Economy flyers – without undercutting it’s existing Business Class product.

    This happens often in Economy Class (Take NZ’s Seat, Seat & Bag, Works Deluxe segementation) – just not seen that often in Business Class except in bid for upgrades (so nothing new really).

    The only catch I can see is that anything that increases paid seat demand in Business Class tends to limit point redemption opportunities in Business Class.

  12. MH uses SITA for its PSS, which is a featureless bare bones system, and has an extremely poor and bug-riddled front-end website, indicating complete lack of expertise.

    Mr. Müller, good luck with implementing your plans!

  13. i applaud the CEO. One item I think they can save $$$ on are the amenity kits. Most seasoned business class flyers already have at least one (whenever I fly JFK-LAX, for example, I always see a lot of amenity kits left behind unopened.)
    I still think MH has to do something innovative in their marketing and operations so people (especially those from China) will start flying MH again. MH really gave a lot of their Chinese market away to CX after the lack of communications to MH370 victims’ families last year.

  14. MH can’t directly compete with SQ (or many other airlines in the region for that matter) on premium travel. Especially considering they’ve decided to offload their A380’s. Their 2-3-2/2-2-2 B777/A333 angled flat biz class seat isn’t competitive at all nowadays.

    With the product they have I do think Mr Müller’s plan to position between a budget carrier and a full premium carrier makes sense.

  15. @AndrewB “… I worry when steps are taken that suggest that we are moving to a world where you don’t earn miles unless you pay extra.”

    This is hardly new territory. Doesn’t every airline nowadays give reduced miles on discounted fares? SQ for example has 4 Economy fares that accrue 10% and 50% mileage on the two cheapest classes respectively.

  16. AA champagne is undrinkable and the food is barely edible, so it wouldn’t be a bad idea to opt it out to save some cash!

  17. Fantastic idea, only pay for what you need or want. I being able to book a Ecc or Prem Ecc day flight and a good lie-flat bed in BC during night would be one very strong reason I would look at Malaysian Airlines again. Also opting out for food and premium alcohol on a 11pm -8am flight seems like a good option too. As All you really want is a good night sleep and a light morning meal prior to landing in BC on a night flight. I would book in a second. Much better idea to do this and pay slighly more the perm Ecc and the angles seat is not a sleeper.
    Congrats to MA if they do this and it will be game changing.

  18. His priority is wrong. Given the quagmire that Malaysia Airlines is in at the moment, he should have prioritized safety as the main focus of this re-branding exercise. Go all out to convince would-be passengers that their staff (pilots, flight attendants, etc) are fully committed to making safety and security their life’s calling. Forget about tweaking the inflight products; those are secondary concerns to future passengers

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