Firefly prospers by doing things differently
When (MAS) started Firefly in 2007, Group CEO Tony Fernandes predicted the new venture would fail. He also mocked the name, saying a firefly is the insect with the shortest lifespan.
Six years on, Firefly is alive and prospering, having found a niche and refrained from competing head-on against low-cost and other full-service carriers. Without divulging figures, CEO Ignatius Ong says Firefly enjoys higher profit margins than the industry average. It has a fleet of 12-500s, and MAS has just ordered 20 72-600s, with options for 16 more, for Firefly and sister carrier MASwings.
Firefly plans to add two ATR 72-600s this year, the first in June, and expects to receive two or three more next year, as well as two in 2015 and two in 2016, says Ong. This will increase its ATR fleet to 20.
Ong says 12 more of the type will be delivered to Firefly after 2016, some for fleet expansion and some to replace ATR 72-500s. The carrier aims to have no ATRs older than eight years, says Ong, in order to keep maintenance costs low, boost the airline's image and generate consumer interest in the brand.
The alternative to buying ATR 72-600s would have been to lease ATR 72-500s to maintain complete commonality. But Ong says, “It makes sense for us to buy rather than lease aircraft. Buying the aircraft is cheaper in the long term.” He adds that “you have great resale value on the ATR. You won't lose money on it.” There are many airlines looking for good secondhand ATRs, he says.
Firefly is expanding its fleet while Malaysian low-cost carriers are increasing capacity. AirAsia Malaysia is adding 10this year, and newcomer Malindo Air tells Aviation Week it aims to start flying next month and build its fleet to 10-12 -900ERs by year-end. Malindo is a joint venture between Indonesia's Lion Air and privately owned National Aerospace & Defense Industries of Malaysia.
“The entry of Malindo will impact both AirAsia and MAS mainline,” Ong says. “There will be a lot of customers, even loyal customers, that will try the new carrier to see what it is like.” But he notes that the challenge for Malindo will be to retain those passengers.
The fact that Firefly operates turboprops and is based at Kuala Lumpur's Sultan Abdul Aziz Shah Airport, just west of the city in Subang, means it serves different routes than the low-cost carriers. Subang's proximity to the city center also helps Firefly distinguish its services., where the others are based, is farther from the city, to the south.
The carrier aims to position itself as a premium airline that caters primarily to business travelers, whom Ong says are less price-conscious than leisure travelers. However, Firefly is planning to do more promotions in an effort to lure vacationers as well. The airline's fleet expansion will enable it to achieve greater economies of scale and have more seats to sell, he says.
In addition to the Subang airport, Firefly has a hub at Penang International Airport on peninsular Malaysia's west coast. It plans to develop two new hubs on the peninsula, too, one somewhere on the east coast—perhaps at its busiest destination there, Kota Bharu, in the northeast corner—and one at Johor Bahru's Senai International Airport on the southern tip.
“Johor Bahru has huge development potential and not just because it's next to Singapore,” says Ong, adding that Malaysia's second-largest city is booming thanks to the region's oil and gas industry. He also cites the Malaysian government's Iskander development, which includes campuses of overseas educational institutions, such as the U.K.'s Newcastle and Southampton universities, as well as tourist attractions and business offices of major international companies.
Developing Johor Bahru's Senai airport as a hub could give Firefly an alternative to Singapore's, where it cannot increase service because of slot constraints. Senai is just a short bus ride away from Singapore.
Seletar Airport in Singapore is another alternative, but Ong says Firefly would only consider it if the there were strong public transport infrastructure in place to move passengers to and from that airport.
“Our passengers to Singapore are mostly business people, so they are going to want to catch a taxi when they arrive at the airport. I can't have 72 people [a full aircraft load of passengers] with no taxis.” Ong says. “Unless I see public infrastructure in place, I will stick to Changi. But I would never say 'never' to Seletar.”