Monday 31 July 2017

Eaglexpress retains growth potential: MGBF

Source: MGBF. A plane in Eaglexpress livery.
Source: MGBF. A plane in Eaglexpress livery.
The Malaysia Global Business Forum (MGBF) research team has developed a report on Eaglexpress, the dedicated Hajj and umrah flight operator that fills the need to move large numbers of passengers beyond the capability of regularly scheduled flights. The report tracks the airline's performance from its establishment and explores how Eaglexpress can ensure a sustainable future.

According to MGBF, the future is bright for Eaglexpress when KSA plans on increasing the quota for pilgrims annually as part of its Vision 2030. "This bodes well for Eaglexpress as technically they would be able to operate flights out of Malaysia under their own call sign and able to provide 'wet leased'* aircraft to fly from any Muslim country during peak times as created during Hajj and umrah seasons throughout the various times in the year to meet the capacity required to move the millions of proposed passengers," MGBF said in a statement.

Eaglexpress was established on in 2012, with an initial paid up capital of RM5 million. The company has since generated over US$400 Million in foreign earnings for Malaysia. The airline also has a valid IATA Operational Safety Audit (IOSA) certificate, and is only one of three operators in the country to obtain it.

Until very recently, MGBF notes that Eaglexpress was operating mostly international business. Its ability to maintain an excellent record with international regulators and safety compliance organisations is a critical success factor, MGBF said. 

The airline was thrown into crisis when Malaysian authorities revoked its Air Services Permit (ASP) in December 2016, while it was fulfilling a RM38 million contract to carry 25,000 pilgrims for umrah from Malaysia. This has now become the focus of a judicial review as Eaglexpress argues that it was not given fair warning or natural justice, especially as the airline at that time had already been operating for five years. The Foreign Operator Certificate (FOC) issued by the Saudi authorities for umrah under its own call sign was subsequently put on hold. The developments are estimated to lead to cumulative business losses of over US$100 million.

MGBF believes that Eaglexpress should consider partnering with or be adopted by a Malaysian government linked company (GLC) to enter the next stage of growth. The research team also said that Eaglexpress is well placed to establish a vendor development programme especially for bumi small and medium sized enterprises (SMEs) to supply halal food and suitable entertainment content on the nine-hour flight to KSA. Eaglexpress could also provide reduced cargo prices for Malaysian products to KSA.

MGBF also says that Eaglexpress has not fully capitalised on goodwill created through hosting Malaysian evacuees from the Yemen crisis, which was not widely publicised. The company has a strong social responsibility culture as well, having employed many single mothers and staff laid off by other airlines in the country. "This needs to be communicated to the public together with the fact that Eaglexpress in a social responsibility that is realised through the business of umrah and Hajj flight operations," MGBF said.

Eaglexpress has seen regional investors looking to invest directly into the company to take advantage of the growth in the global umrah and Hajj business, especially in key markets of Africa, Middle East and Greater Asia. Markets which currently see many non-Muslim companies leading the way in supply of aircraft.

*Wet leased aircraft are leased together with crew as opposed to dry leased aircraft, which is the leasing of the aircraft alone.