August 31, 2017 10:00 am JST

CEO in the news: Malaysia Airlines' CEO keeping turnaround afloat

Peter Bellew is 'going retro' on flag carrier's road to recovery

CK TAN, Nikkei staff writer

Malaysia Airlines CEO Peter Bellew © AP

KUALA LUMPUR Pak Ali, a durian peddler in the Mont Kiara suburb of Kuala Lumpur, has an affection for Malaysia Airlines. It's one of his country's treasures, he feels. When the national flag carrier in May 2016 announced a plan to change cabin crew uniforms as part of a rebranding strategy, Uncle Ali was displeased.

He was not alone. The uniform debate was heating up a month later when Peter Bellew became the airline's CEO. Soon thereafter, Bellew happened to drop by Pak Ali's roadside kiosk.

"Why are you changing the uniforms?" Pak Ali asked Bellew, there for a quick taste of the tropical fruit with the pungent aroma. "The baju kebaya is the pride of Malaysia. Your stewardesses stand out in it," Pak Ali argued, referring to the traditional Malay costume and decades-old trademark attire.

Bellew told Pak Ali the uniform change had already been put on hold.

"I felt I needed to do things quickly," Bellew said in an interview at his office overlooking the runways at Kuala Lumpur International Airport. In fact, he had reversed his predecessor's decision regarding the uniforms by the time he dropped by Pak Ali's stand, he revealed in the interview.

Malaysia Airlines was already in desperate straits before 2014, the year that Flight 370, on its way to Beijing, mysteriously disappeared and Flight 17, which had just taken off from Amsterdam, was shot down in war-torn Ukraine. A bloated workforce and unprofitable routes had put the flag carrier in a deep hole. The disasters forced the government to nationalize the airline through sovereign wealth fund Khazanah Nasional.

Since the carrier was delisted from the Kuala Lumpur Stock Exchange in December of that year, it has been under no obligation to release its financials. As such, only company insiders know how well a drastic restructuring effort is paying off.

Bellew's predecessor, Christoph Mueller, had been hired to carry out that restructuring, but in April 2016, he announced he would leave prematurely on "personal grounds."

Mueller had made a name for himself by reviving Irish flag carrier Aer Lingus. In his time in Malaysia Airlines' hot seat, he would cut about 6,000 jobs, downsize the fleet by dozens of aircraft and eliminate unprofitable long-haul routes to Europe and the Americas.

When he departed, though, his restructuring plan was at risk of falling apart.

Hence Bellew's sense of urgency.

"It has been very challenging," Bellew said, recalling the past year. He was headhunted in September 2015. Bellew had been working at Ryanair, where he served as the director of flight operations, managing 320 aircraft that were flying to and from 70 airports.

Despite the nine years spent at the Dublin-based budget carrier, which also included a stint as head of sales and marketing, Bellew was able to quickly immerse himself in the culture of a full-service airline.

IRISH WARMTH "There aren't many full-service carriers left, more so those without a budget carrier arm," said Bellew, who had been Malaysia Airlines' chief operating officer before Mueller left. But he sees plenty of travelers who prefer knowing what the final fare will be and that they will be getting meals, baggage allowances, pillows and blankets.

Bellew also does not believe in lowering prices to capture market share lost to budget carriers like AirAsia.

"I am very pragmatic about [competition]," he said.

He has good reason to be. What Bellew called an "incredible price war" between AirAsia and Malindo Air, which bills itself as "a premium Malaysian airline," has made Malaysia one of the cheapest countries in the region for flights.

"We differentiate ourselves [by] improving our products," Bellew said.

Robert Saw, head of wholesale distribution at PST Travel Services, one of Malaysia's top travel companies, said that by raising Malaysia Airlines' profile, Bellew has become one of the few aviation executives that market players like to talk about.

Perhaps that statement would put a smile on Bellew's face. The CEO, after all, has been trying to win allies.

Becoming a leader of a company with a workforce of 14,000, the Irishman knew he would have to come to understand the locals as quickly as possible. He participated in as many internal meetings as he could fit in. When not in meetings, Bellew would head to KLIA terminals to talk to travelers, including those flying with AirAsia.

"Peter's warm Irish personality should be of great help in getting people on board to do what is required," said John Strickland, director of JLS Consulting, a London-based aviation consulting company.

The two know each other personally.

PUTTING EGO ASIDE Bellew said the "big" thing he had to do initially was review the rebranding plan -- a sensitive matter within and outside the airline.

"Changing the brand [in the wrong way] could end up dumping 40 years of heritage," Bellew said, remembering proposals to replace the "Malaysia Airlines" moniker with some "wacky names."

Instead of ditching the airline's name, uniforms and other icons associated with the brand, the new CEO decided that the carrier would "go retro." Malaysia Airlines would pay tribute to its legacy as a pure-play national flag carrier. It would make the most of its priority status regarding flight slots at the airports of capitals around the world. It would improve its in-flight services and strengthen relations with travel agents, who were booking 90% of the corporate reservations the airline was getting.

The relationships had gone sour because the agents had to pay more for tickets than flyers who booked flights on the airline's website.

"I am sorry," Bellew would tell PST Travel Services and a dozen other travel agents in Malaysia, Thailand, Indonesia, China and Australia. "We shouldn't have done it."

In many cases, he visited the agencies in person. And the website stopped undercutting travel agents.

The apologies took many in the tourism industry by surprise, including Saw of PST Travel Services. "We hardly [ever] see a Malaysia Airlines chief executive come to meet us," Saw said.

Sales through agencies jumped immediately, and the sector now has more activity thanks to campaigns that allow flyers to bid on upgrades.

Before Bellew, Malaysia Airlines never had a CEO stay long enough to revive the carrier, one of the country's highly politicized state-owned companies. And before Mueller, there were hardly any foreigners at the top. The fact that the airline has now seen two western CEOs in a row suggests an urgency to put aside national ego.

PRAYERS FROM HOME While the risk of political interference and other challenges remain, Bellew can draw on his experience at Ryanair -- recognized for its operational acumen, focus on costs and consistent profitability -- to drive Malaysia Airlines forward, according to Strickland, the aviation consultancy director.

He will have to do so while also overseeing Malaysia Aviation Group, which Khazanah created in May 2016 in the names of management efficiency and fundraising flexibility. The holding company's umbrella covers Malaysia Airlines, Firefly, a "community" carrier that uses propeller planes, as well as maintenance and leasing units.

Bellew has plenty to think about.

The official search for MH370 has been suspended, but data analysis and other global efforts to learn of the jetliner's fate continue. The CEO hopes these efforts pay off and that one day the plane's black box recordings solve the mystery.

Brendan Sobie, an analyst at the Center for Aviation, said Malaysia Airlines' fleet is ripe for replacements, especially if it wants to maximize its slot advantages at airports in primary cities.

And the airline is still recovering. Bellew reckons the big opportunities are in China, Japan, South Korea and Taiwan, which is where his recovery blueprint wants to take the airline. The carrier is adding 11 new routes to China and is eyeing up to 30 more to the country in the next five years.

Bellew said the North Asia plans and other initiatives will see the carrier to profitability by the second half of next year and to a possible relisting in 2019.

The national carrier recently began advertising to fill about 300 jobs, a third of them for pilots. "That's very substantial," Bellew said, "and they are all new positions."

He is also focused on raising the airline's load factor -- an indication of how full passenger aircraft are while in the air -- from the top-end of the 70% range. AirAsia's load factor is in the high 80% range.

Bellew's contract ends in June 2019. Until then, and despite all that he has achieved since last summer, he will be walking a tightrope.

The 52-year-old hails from the village of Fossa, in Ireland's County Kerry. Back home, Bellew said, "the local church says prayers [for me]."

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