ROYAL BRUNEI AIRLINES IN TROUBLE Royal Brunei pays the price of decades-long wrong strategy - eTurboNews.com
BANGKOK (eTN)- Arrogance? Probably. Lack of vision? Certainly. Royal Brunei Airlines remains a mystery among Southeast Asian carriers. The carrier serves Southeast Asia’s second wealthiest country after Singapore with a GDP per capita of over US$ 20,000. But at the same time, the Sultanate of Brunei is the less populated countries among ASEAN members with a population of 360,000 inhabitants. Although Brunei population is small, the airline’s catchment area is rather attractive. Brunei is the only independent Kingdom located on Borneo Island with its population of 20 million inhabitants. Southern Borneo (Kalimantan) belongs to Indonesia, while a large part of Northern Borneo opted half a century ago to rally the Malaysian Federation. An independent and neutral Brunei could then position itself as the ideal international gateway to connect Borneo with the rest of the world…
Except that RBA has preferred to concentrate until today on prestigious routes such as long haul flights. Its fleet is composed of Airbus A320 and Boeing 777-200 ER, leased from Singapore Airlines. And instead of offering flights to Sandakan (Malaysia), Balikpapan, Pontianak and Makassar (Indonesia), or Davao (Philippines) –they all desperately look for more international connections!-, the airline’s management found more rewarding to propose flights to Auckland, Brisbane, Dubai, London or Melbourne. Of course, in the tiny Kingdom, RBA has been long considered as a toy, an object of pride to be exhibited worldwide.
Unfortunately, this strategy cannot survive anymore in current world air transport. RBA is losing money, a lot of money on long haul flights due to the absence of O&D° passengers. Flights in transit to Australia from Southeast Asia or London were also wrongly timed, making Bandar Sri Begawan an unattractive alternative. Finally, low cost carriers in the region –especially AirAsia in neighbouring cities of Kota Kinabalu and Miri but also in Kuala Lumpur- slowly made Brunei national carrier’s own regional network moribund and its proposed fares rather expensive.
The airline’s pays now the price of its overrated ambitions. By appointing ex-Aer Lingus executive Dermot Mannion, the airline’s shareholders (in reality the Sultanate of Brunei) show finally that they understand the urgency of the situation. RBA is probably close to financial asphyxia, even its management will never admit it. But the decisions now taken by Dermot Mannion show that the situation at the airline has been seriously addressed. From August, RBA will terminate flights to Kuching in Sarawak and from October, it will end most of its intercontinental flights, abandoning Auckland, Brisbane, Perth as well as Ho Chi Minh City. From an intercontinental network which still had Frankfurt and Sydney a decade ago, RBA will be only left with three overseas destinations: London via Dubai and Melbourne. And nobody is now certain that those destinations will not be eliminated in a second phase of restructuring.
Meanwhile, Bandar Sri Begawan could be turned into the missing international gateway to Borneo Island and even to neighbouring Celebes and Mindanao Islands… Opening new routes in a circle of up to three or four hours around Brunei, offering a more competitive fare structure matching low cost airlines could dramatically change RBA destiny. A good example to take inspiration from is Singapore-based Silk Air, Singapore Airlines’ regional subsidiary. The carrier managed to grow its traffic volume despite low cost competition by offering a simplified service without compromising on high quality for but passengers. RBA Management’s announcement this week certainly marks the end of a dream… but probably also of an increasingly frightening nightmare.