One World wins Malaysia Airlines.What now for Skyteam in S.E. Asia?

Malaysia Airlines Qantas sponsored bid to join the One World Alliance strengthens both parties and leaves the Skyteam alliance short of options in South East Asia. Star, with Thai and Singapore Airlines now dominates the Bangkok and Singapore hubs, though Qantas' own Europe-Australia hubbing operation in Singapore is also significant. One World with Cathay Pacific and now Malaysia dominate Hong Kong and Kuala Lumpur. That has to give Skyteam a headache.

Skyteam will have hoped that the long standing KLM Amsterdam-Kuala Lumpur- Australia codeshare, with each airline providing a daily Amsterdam-Kuala Lumpur service would have stood them in good stead. Most less enterprising European airlines have found it difficult to simultaneously serve profitably the leisure rich but premium deficient Malaysian market while also being competitive -ie high frequency with nonstop services- and Singapore. As result all the European majors other than KLM and Lufthansa have in the last ten or more years either ignored Malaysia or left it to a codeshare operated by Malaysian aircraft. From this they gain a small presence but only a few percentage points of codeshare commission and not a big slice of the revenue.

So how come that, up against KLM undoubtedly championing Skyteam, an airline with no operation of its own to Malaysia has brought Malaysia Airlines into its own alliance group? The answer lies in two things,- a long history and a significant present and future. Qantas was involved with MAS since before its formal separation in 1971 from the original highly successful,IATA mould-breaking Malaysia Singapore Airlines. Its biggest rival for early favour was BA's predecessor BOAC and for a while the two ran neck and neck and would have been happy to break each others'. Qantas and Australia had two major advantages though. One was that its unusually long term country manager ,John Hill, had built up strong and deep relationships in the upper levels of Malaysian politics, so much so that he was eventually rewarded with the title "Dato", the Malaysian equivalent of a British knighthood and one infrequently given to foreigners.The second was that Australia had never been the colonial power so was better liked politically. BOAC hadn't got the same depth of relationships and against the UK there was enormous resentment that at the split all the MSA traffic rights to London were initially given to new arch rival and much resented Singapore Airlines. BOAC did pull back a few points by getting MAS visibly airborne in double quick time and ahead of its "real" domestic and regional operations by operating ostensibly jointly with the infant MAS a series of "exempt charters" between London and Kuala Lumpur. These were low cost scheduled services on universal sale rather than being restricted to often pretty bogus affinity groups. Participants in these had to be members of at least six months standing of a club or assosciation set up for a purpose other than travel. The greatest example was probably the Trowbridge Caged Birds Society which mushroomed from a few bird cage owners in Britain's rural west country into a tens of thousands strong club offering its members high frequency flights between the UK and USA. Naturally ,they would say, people interested in birds are interested in flying. Nothing strange about that. To give MAS a further boost, BOAC painted one side of one of its Boeing 707s in the brand new MAS livery, albeit only for the first month. The colonial legacy though increasingly grated in Malaysian politics culminating in a "Buy British Last " campaign in the later 1970s.

So much for the history. What about the present and the future? Qantas is back in Malaysia from Australia with its low cost medium haul Jetstar operation. Add to that the fact that Australia is a much more important trading partner than the Netherlands and also has much more regional political significance and it is no surprise that, disappointed though KLM and Skyteam will be, the Australians and One World have prevailed. This is despite the group containing the old irritant,-the British/BA who now currently have no aviation toehold in Malaysia of their own but are substantially submerged in a joint service agreement with Qantas between Australia, South East Asia and Europe. This itself is ironic in view of over seventy years of Qantas/BA internecine rivalries interspersed with a series of periods of cooperation.For the last fifteen or so though the relationship has been in the good mates phase, achieved in no small part from BA withdrawing its own Australia services from everywhere other than Sydney. (BA now goes to Australia 14 times a week. Emirates 63).

What do Malaysia and Kuala Lumpur mean to One World other than keeping other alliances out? Thanks to nearby Singapore and to Malaysia's late opening in 1998 of a global quality airport, Kuala Lumpur has struggled to build up services by foreign carriers. Malaysia Airlines has probably been reasonably happy with this as it has limited direct competition and pushed the European airlines in particular to do codeshares on its metal. Malaysia itself, despite a tendancy towards nationalism and protectionism ,has probably been less happy as it would like to have been seen as more of a true international crossroads. The sight of all those varied tails down at Changi has been very annoying.

Finally, what does One World offer Malaysia and its national airline? At the very least it will greatly strengthen the airline's frequent flyer programme which has been competing especially with Star's much more powerful global one out of Singapore. This should significantly reinforce Malaysia Airlines in its home market and particularly amongst frequent flyers in the premium cabins.Secondly it should encourage more codeshares on Malaysia's own services. Even BA might sign up despite possible diversion of small amounts of traffic from its own and Qantas' joint London services to and from Singapore. Qantas would have to agree but within One World that is more likely than before. Thirdly , other One World carriers may look again at putting their own aircraft into Kuala Lumpur. The Malaysia Airlines hub there offers a good range of city pairs at reasonable frequencies. Good quality hotels are close at hand for any misconnections and delays. The ground service at Kuala Lumpur could do with some polish to achieve Singapore's usually excellent mix of courtesy, care and a "can do" attitude and it is up to One World to put the pressure on for that to be achieved.

All the parties to this linkup should be pleased with it. It gives them some interesting opportunities and should be welcome to the Malaysian Government in its ceaseless quest to avoid Singapore running away with all the goodies. It is also an excellent launch pad for some new thinking about Malaysia Airlines' and Kuala Lumpur International Airport's place in the world. Shame for Skyteam but they will have to smile and think of something else.