Colombo Telegraph

Code Sharing To Share The World

By Sarath De Alwis

Sarath de Alwis

“Once a company understands who its targeted customers are, it can identify the objectives and measures for the value proposition it intends to offer. The value proposition defines the company’s customer strategy by describing the unique mix of product, price, service, relationship, and image that a company offers its targeted group of customers. It should communicate what the company expects to do for its customers better or differently than its competitors” Geo Political Analyst Robert S Kaplan and David Norton makes this observation in ‘Strategy Maps’ converting intangible assets in to tangible outcomes.

The code share deal between Emirates and restructured Malaysian Airlines offers a lesson in drawing such strategy maps for Airlines. A lesson we should not ignore. Leveraging geography does not mean reinventing the wheel.

The latest Aviation deal has lessons for our own beleaguered national carrier. It appears that Emirates Airlines and the restructured Malaysian Airline have decided to recreate British viceroy Nathaniel Curzons ‘Raj that extended from the ‘Trucial sates ‘to the Malay peninsula in the skies!

The new code sharing agreement between mega carrier Emirates and the restructured Malaysian Airline has carved up their spheres that stretch from the US east coast across the Urals and the Himalayas to the Pacific Rim.

The deal was inked by Tim Clarke the Emirates President and Christoph Mueller the new CEO of Malaysian Airlines Berhard [MAB].

MAB came in to being in January 2015 by an act of Parliament supported that received bipartisan endorsement of the Malaysian Parliament. This enabling legislation stipulates that the new Airline MAB is not the successor to Malaysia Airline System [MAS].

The brief detour that follows is of some significance to our own national carrier. In the light of this development, Sri Lankan stands to get overtures from others. They may not be as large or as flamboyant as Emirates but with matching ambitions over Asian skies and deep pockets or access to matching resources.

The act of Parliament that enabled the restructuring of the Air Line as Malaysia Airlines Berhad” is clear in its principal purpose – to carry on the business of the national carrier as a commercial enterprise and such other businesses as the board of directors of the new entity ‘ Malaysia Airlines Berhad ‘thinks fit.’

There is more. “The Malaysia Airlines Berhad may, in its sole discretion, offer employment to any person who immediately before the date of that offer is in the employment or service of the Administered Companies on such terms and conditions as the Malaysia Airlines Berhad may determine.” It is serious about downsizing – a subject this writer referred to last week.

It then makes the surgical incision. ‘Malaysia Airlines Berhad is not a successor employer.’

Notwithstanding anything to the contrary in this Act or under any law, where the Administrator assumes control of the Administered Companies, or where the Malaysia Airlines Berhad makes an offer of employment to a person in the employment or service of the Administered Companies, or where the Malaysia Airlines Berhad enters into a transition service agreement with the Administered Companies, the Administrator, appointer or the Malaysia Airlines Berhad shall not

(a) be regarded as the successor, assignee or transferee or a successor employer to the Administered Companies;

(b) be liable for any obligation relating to any retirement plan or other post-employment benefit plans in respect of the employees or former employees of the Administered Companies or any predecessor of the Administered Companies that exists prior to the assumption of control or appointment; or

(c) be liable for any sum which is calculated by reference to a period of time prior to Malaysia Airlines Berhad becoming the employer of the person in question.

The deal with Emirates is clearly not a new chapter for the Malaysian carrier. It is a new beginning. It holds great commercial promise.

The new CEO Christoph Mueller was selected by ‘ Khazanah’ the sovereign investment fund that now owns Malaysia Airlines.

The German Born turnaround specialist is fondly called the ‘Terminator’ by the Irish press when he turned around the Irish carrier ‘Aer Lingus’.

Some years earlier he struggled to save Belgium’s SABENA held hostage by powerful unions and bleeding with every takeoff and landing. The 2001 World Trade Center attacks precipitated the liquidation of the Belgian national airline.

Christoph Mueller told a University of Cambridge Business School “My experience is, it’s very difficult to create a winning team from existing management. There’s nowhere more obfuscation than in the boardroom at the beginning of a turnaround.” Obviously he is confident about the determination of the new Board at the helm of the Airline that he has to build.

This brief preamble was necessary. It has an intrinsic relevance to our own calamitous experience in the Airline business.

The code share agreement leaves the Asia Pacific as the domain of the Malaysian Airline. The Mega Carrier Emirates has charge of Europe, Middle East, Africa and the two Indian Ocean islands of Mauritius and Seychelles along with Trans-Atlantic routes to the Americas. What is equally impressive is the arrangements the Mega carrier has with US carriers JetBlue and Alaska Air. Jet Blue out of Florida offers access to South America, the Caribbean and Mexico City.

The Malaysian Airline will retain its twice daily flights to London using its A380s. Common sense tells us that it is only a matter of time before it decides the Malaysians decide to deploy the A380 to feed in to the funnel in Dubai or allow a wet lease of the A380s to Emirates on the London route.

Emirates will have its code on flights of Malaysia Airlines to all domestic routes in Malaysia, South East Asia and selected cities across the Asia Pacific region.

The code sharing, we are told, will be implemented progressively through 2016 subject to regulatory approvals.

Malaysian Airline’s customers will have access to 38 European cities, 15 Cities in the Americas and 36 destinations in the Middle East and Africa and the two Indian Ocean islands of Seychelles and Mauritius.

Emirates’ customers will have access to Malaysia Airline’s extensive Asia Pacific network that is served by approximately 300 daily departures.

Emirates is already in partnership with Qantas flying 14 times linking Australis with Dubai providing ‘one stop’ access to points in the Middle East, Europe and North America across the Atlantic. That partnership claims the distinction of the largest shared A380 Network.

Most importantly the Malaysians have seen the agreement in the larger picture. “This partnership gives our customers access to a dramatically expanded range of travel options. It is a great way for customers to travel seamlessly to major cities across the world. Furthermore, Dubai is a tourism, trade and logistics hub which has earned itself the reputation as being the gateway between the East and the West. Not only will this provide Malaysians unprecedented super-connectivity to the whole world, it will also make it much easier for travelers from all corners of the globe to visit Malaysia and experience its rich culture, nature and Malaysian hospitality. This is part of the national carrier’s initiative towards enhancing air connectivity with key priority markets overseas for increased tourist arrivals into Malaysia.”

Emirates is equally enthusiastic. “Our new codeshare agreement with Malaysia Airlines will enable our passengers to experience new destinations and improved connectivity in the ever-popular Southeast Asia region, and also additional comforts such as reciprocal lounge access and priority check-in. Malaysia Airlines’ extensive network in the emerging Southeast Asia region perfectly complements Emirates’ global network and enhances the choice of travel destinations for customers in both the business and leisure segment.”

What is the moral of this fable? SriLankan Airlines is now the only bride in town. Despite her warts, SriLankan Airlines finds itself as a bride of immense charm. She will if sensible be pursued by several suitors. With some imagination she could entice some others who are jealous of their respective roosts on the Pacific Rim.

It must now concede that promoting tourism by enticing visitors with subsidized travel is not its remit. It must also concede that there cannot be blood less restructuring. Only 14000 of the more than 20,000 employees of the former Malaysian Airline are expected to receive new offer letters on new terms in the restructured Air Line. SriLankan Airlines according to the New CEO has 6900 staff for 21 Aircraft that is a ratio of 328:1. Malaysian with 92 Aircraft had 20000 a ratio of 210: 1 aircraft now reduced to 152:1 Aircraft.

Milton Friedman said that there was no such thing as a free lunch. The departed Economic sage has a soulmate in Christoph Mueller- the Terminator’.

This article is based on desk research done while recovering from a serious bout of viral influenza. Information that is in the public domain has at least been subjected to the test of public scrutiny.

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