The Airlines are Drawn

Text size +-
After making headlines earlier this autumn, when engine problems closed a Heathrow runway for almost two hours, Royal Brunei Airlines (RBA) are now back in the news for the right reasons. Two Boeing-777ERs are expected to arrive in the sultanate within the next fortnight, bringing with them the capacity for RBA to operate direct flights to London.

The aircraft, which are to be leased and later joined by 777s owned directly by RBA, represent an ongoing evolution in the airline's fleet, a policy set to culminate in RBA's 2009 acquisition of the Boeing-787 Dreamliner, rival to Airbus' recently-launched A380. With the Dreamliner heralded as the next generation of airplanes, and the 777s boasting a lightweight, fuel-efficient design, RBA is aiming to consolidate its position amid fierce competition in Southeast Asia's burgeoning aviation sector.

Changes are afoot, however, both on and off runways. In the boardroom, RBA has recruited the expertise of new CEO Ray Sayer, a veteran of British Airways and former-CEO of both Gibraltar Airways and Bahrain Airport Services. With Director Dato Haji Hamid professing optimism, "that with his experience and worldwide network in the airline industry, Sayer will make a significant contribution to our airline's further growth", the new arrival comes at a time of reappraisal and consolidation for RBA.

In the past year, RBA has announced decisions, "not taken lightly", to suspend routes to both Darwin and Frankfurt, offsetting the resumption of flights to Kuching and a new route to Ho Chi Minh City. With Kuching Malaysia's fourth city, and an important gateway to the tourist target of Sarawak, and both Brunei and Vietnam expressing desire for closer relations, RBA's new itinerary might be seen to represent a prioritising of regional ambitions above the global. Such a decision would not be wholly without precedent, Malaysia Airways having recently downscaled so-called 'prestige' routes between Kuala-Lumpur and London.

All of which is indicative of an industry very much in the throes of change. Two factors are driving this shake-up. The first, already landed, being the advent of low-cost airlines such as Malaysia's AirAsia and Singapore's Tiger Airways. The second, due a 2008 arrival, being the 'open-skies' agreement of the Association of Southeast Asian Nations (ASEAN).

Since its 2001 birth, AirAsia claims to have flown 35m passengers, attracted by low fares marketed through the internet and SMS messaging. This week the Centre for Asia-Pacific Aviation (CAPA) anointed AirAsia the best local airline, "for creating the greatest impact on the development of the airline industry in the region." The success of the model has prompted forays into low-cost flights by Australia's QANTAS (Jetstar Asia), while Singapore Airlines established the low-cost Tiger Airways in December 2003.

Coupled with this intense exposure to private-sector forces, the deregulation will put further pressure on RBA to make its way to the sharp-end of the market, or face being left behind. A 2008 phase of open-skies will open up unlimited flights between ASEAN's ten capitals, while liberalisation is set to encompass auxiliary cities by 2010. Jumping the gun, Singapore Airlines and Malaysia Airways (MAS) announced in October, over a year early, that the lucrative Singapore-Kuala Lumpur route will be opened to competition, an illustration of the way in which airlines will sacrifice their own cash-cows in return for access to others.

Although such a daunting market leaves no place for complacency, RBA can feel marginal confidence. Over decades, the airline has been regarded, alongside Brunei Shell Petroleum, as one of the nation's best businesses. This international standing was reconfirmed when, in 2005, the German travel magazine, Clever Reisen (Clever Travels), awarded RBA "Best Economy Class of Asia". RBA is aiming to build on this qualitative advantage by capitalising on niche tourist routes such as China-Sarawak and Japan-Bali. The likes of AirAsia will pursue them into these operations but as Dato Haji Ahmad asserted, "our airline caters to a different clientele and a different market." Furthermore, RBA is not defenceless in the face of this threat. Regeneration of the fleet will simultaneously increase efficiency, reduce operating costs and score environmental points in a climate change-concerned market.

Wider changes in aviation should also play into Brunei's hands. Open-skies will give foreign competition greater access to the 1m passengers arriving annually in Bandar. In return, RBA will be able to court the custom of 49m visitors flying elsewhere in ASEAN. Regardless of which private sector players capture this newfound business most effectively, Brunei as a nation is certain to benefit from the dose of competitive market culture and the rising cost-efficiencies sure to be seized upon by businesses and tourists.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In Brunei Darussalam

Brunei Darussalam: Regional energy cooperation in spotlight

A drive is gathering pace in Brunei Darussalam to increase regional cooperation on energy provision as part of a broader bid by Asia’s oil producers to meet rising demand from nearby fast-growing...


Emerging markets lead uptake of cryptocurrency despite bear market

Despite global financial headwinds and significant declines in the value of cryptocurrencies this year, emerging markets are adopting the technology at a rapid pace.