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Firefly plans to expand services and take up 30 B737-800s

Tuesday November 9, 2010

Firefly, a wholly-owned unit of Malaysia Airlines (MAS), would take up to 30 B737-800 aircraft from year-end to 2015 as part of its expansion into east Malaysia now and into the regional markets in future.

The airline, which currently operates turbo-propeller planes from Subang airport, would take in its first jet aircraft in December and use it from January for daily flights out of the main terminal building at KL International Airport (KLIA) to Kota Kinabalu (KK) and Kuching.

By Jan 15, it would operate two daily flights each from Kuala Lumpur to KK and KL to Kuching. The flights would be increased to thrice daily for KL-KK and four times a day for KL-Kuching on Jan 24.

Firefly plans to partly lease and partly own the B737 aircraft. Six would be in operation next year, seven each for 2012 and 2013 and five each for 2014 and 2015. To-date, it has secured the lease for four out of the six B737s needed next year.

“We will lease from the open market and will place (purchase) orders for the aircraft by third or fourth quarter of next year.

“Hopefully, by then, we will have enough cash for the pre-delivery payments,” FlyFirefly Sdn Bhd managing director Datuk Eddy Leong said at a briefing on Firefly’s expansion plans yesterday.

Leong said Firefly, which was currently profitable, would finance the initial aircraft delivery via internal funds and that the company would not look to raise funds.

A local bank-backed analyst said Firefly was likely to lease its B737 aircraft needs up to 2012, and make purchases once it could prove itself with good profits from the leased B737 aircraft.

“Leasing is less taxing on the balance sheet but will be more expensive over the long term. The open market lease charges changes from quarter to quarter.

“A brand-new low-specs (specification) B737-800 from the open market (can be leased currently) at US$350,000-US$390,000 per month,” said the analyst when contacted by StarBiz.

Leong told reporters that Firefly’s 30 B737-800s were separate from the 35 B737-800 aircraft order (with an option for 20) made by parent company MAS.

He said the aircraft choice was modelled after the two most successful low-cost carriers (LCC) in the world, America’s Southwest Airlines and Europe’s Ryanair.

The B737-800s can fly some six hours plus and has 189 seats – nine seats more than the Airbus 320s used by LCCs AirAsia, JetStar Airways and Tiger Airways.

“The B737-800 has a lower operating cost compared with another aircraft (A320). Firefly’s fares will be extremely competitive and our unit cost (cost per available seat kilometer – CASK) will be the lowest in Malaysia,” Leong added.

AirAsia’s CASK last year stood at 10.41 sen while its CASK for the second quarter ended June this year was 11.74 sen.

Leong also dismissed reports that Firefly would be taking on MAS’ older B737-400 aircraft.

Analysts said Firefly’s entry into the jet market would not impact AirAsia in the immediate future but in 2012.

“The immediate impact will be minor. It will more likely be felt in 18 months,” said an analyst with a foreign research house.

The local bank-backed analyst anticipates that Firefly would look to further compete with AirAsia’s stronghold over domestic flights to east Malaysia, which include Sibu, Miri, Tawau and Sandakan.

Asked when Firefly would expand into Asean countries using the jets, Leong said it depended on when Firefly received the rights.

“We are going through the traffic right approvals and also the slots. I think all the major Asean countries are potential candidates,” he added.

Leong said Firefly was not using the temporary low-cost carrier terminal (LCCT) as it was congested and preferred the main terminal due to its code share with MAS.

But he did not rule out the possibility of shifting operations to the new LCCT, KLIA2, once it was ready.

“We are in discussions with MAB (Malaysia Airports Holdings Bhd). We are waiting for a lot of details to be shared before we make a decision,” said Leong.

He said there were no complexities involved in flying out from two points, Subang and KLIA, and would maintain the turboprop operations in Subang airport.

Firefly currently has seven ATR 72-500 aircraft and would add another two by December and one by January next year.

Meanwhile, MAS was voted the World’s Leading Airline to Asia by World Travel Awards.

This article is a verbatim copy of the original article from The Star.

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