Malaysia Airlines is Joining OneWorld (a.k.a SkyTeam Really Dropped the Ball)

Late last night, it became apparent that Malaysia Airlines would be joining the OneWorld Alliance. Malaysia Airlines, a Skytrax 5 star carrier, operates a mixed fleet of 91 widebody and narrowbody aircraft from their hubs at Kuala Lampur (main hub), Kuching, and Kota Kinabalu. They also operate a regional subsidiary known as MASWings and an LCC by the name of Firefly. Qantas will sponsor the airline’s entry into the alliance, which should be formalized soon. Malaysia Airlines had previously announced that it was targeting alliance entry for this year.

Overall, this is really big news for OneWorld. Malaysia Airlines is a quality airline with a great product across the board. They have a gorgeous hub in Kuala Lampur, that is positioned right at the crossroads of one of the world’s fastest growing regions; Southeast Asia. They’re also quite profitable, though they do face a growing threat in AirAsia (and X), already one of SE Asia’s largest LCC, which has its largest hub in Kuala Lampur as well.

Moreover, they’re a big competitor to Qantas/British Airways both on the Kangaroo route, and on Australia-Asia sectors. Bringing them into the fold allows Qantas (and British Airways) to take advantage of Malaysia Airlines’ extensive global network, and marginally reduce competition on the all important kangaroo route. From Malaysia Airlines’ perspective, the benefits are similar; less Kangaroo competition and access to domestic Australian and inter European networks.

However, the airline is likely to go beyond forming links with just Qantas and British Airways to the whole OneWorld Alliance. They currently have codeshare agreements with Cathay Pacific and Royal Jordanian, and it is likely that those will be strengthened further. It’s also likely that they will pursue agreements with LAN Group (whose hub in Buenos Aires they serve), American Airlines (a strong partner in Los Angeles), and Japan Airlines.

You could also see some changes to the alliance route structure in terms of SE Asia. Right now, Qantas serves Singapore, Bangkok, and Hong Kong in the area. Many of these flights continue on to London-Heathrow. The operation in Singapore represents a bit of a scissors hub, with multiple London flights, and connecting service to Frankfurt, Mumbai, Denpasar, Jakarta, and a slew of Australian destinations. While Singapore is an important (and premium) market for OneWorld, you could see the alliance and Qantas push more connecting passengers through Kuala Lampur. British Airways also operates flights to Sydney via Singapore (and Bankgok), mostly on 747s. The way I see it, British Airways now has an incentive to perhaps switch their Bangkok-Sydney leg to Kuala Lampur, or even downgrade and operate both. Additionally, this move should help change some of the aircraft deployments of Malaysia Airlines. London was already confirmed as the first destination for the A380, but you’ll likely see Sydney on that list as well. The viability of their Kuala Lampur-Taipei-Los Angeles route (down to 3 flights per week) can only increase with new feed from American in LA. Ditto for LAN Argentina in Buenos Aires and even British Airways/Comair in Johannesburg and Cape Town. In terms of new routes, you’re also likely to see service between Kuala Lampur and Madrid (Iberia partnership), and Helsinki (Finnair); maybe on some of those new A330s Malaysia has coming in.

While the OneWorld Alliance certainly stands to benefit from this, the real loser here has to be SkyTeam. Malaysia Arlines had been flirting with SkyTeam for a while now. They’d built a close partnership with KLM (even planning to send the A380 to Amsterdam). Further codeshares were present with Alitalia, China Southern, Garuda Indonesia, and Korean Air. But thanks to tensions with other alliance partners (cough-Air France-cough), they were never able to get close enough for full integration. In the interim, SkyTeam added Vietnam Airlines and Garuda Indonesia, which lessened the potential role for Malaysia Airlines. In my opinion, SkyTeam really dropped the ball here. While Vietnam Airlines and Garuda are nice little players in fast-growing markets, neither can match the scope or quality of Malaysia Airlines. Furthermore, neither Jakarta nor Saigon comes close in terms of matching Kuala Lampur as a hub, especially in terms of Europe-Australia traffic flows; which is where I think this loss will hurt the most.

The announcement also means that the alliance situation in Asia-Pacific.  has pretty much become set in stone. With Kingfisher joining OneWorld, the only major players left up for grabs are Jet Airways in India, Hainan Airlines in China, and Virgin Australia down under. In terms of the alliances overall; Star Alliance is a clear number one overall, but SkyTeam and OneWorld are pretty much in a dead heat for number two. In Northeast Asia (Japan/Korea); Star is #1 with ANA and Asiana, SkyTeam is a slight #2 behind Delta’s Narita hub and Korean Air’s superhub, and OneWorld counters with a weakened Japan Airlines. SkyTeam, with both China Eastern and China Southern in hand is a clear #1 in China, and Star is #2 based on Air China. For Southern Asia, Star is #1 (Singapore, Thai, Eva Air), OneWorld now #2 (Cathay, Malaysia), and SkyTeam a distant #3 (China Airlines, Vietnam Airlines, and Garuda).

Ultimately however, this move strengthens OneWorld’s position in Southeast Asia, and on the Kangaroo route. All parties involved should benefit from the new agreements

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