Royal Brunei Airlines

RBA's latest strategy had many Bruneians talking. eTurboNews, the Global Travel Industry News had this article about the airlines which probably can answer why the RBA Board did what it did. You can link to the etn website or read it below:

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ROYAL BRUNEI AIRLINES IN TROUBLE
Royal Brunei pays the price of decades-long wrong strateg

BY LUC CITRINOT, ETN | JUN 23, 2011
BANGKOK, Thailand (eTN) - Arrogance? Probably. Lack of vision? Certainly. Royal Brunei Airlines (RBA) 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 one of the least-populated countries among ASEAN members with a population of 360,000 inhabitants. Although Brunei's 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.

RBA has preferred to concentrate until today on prestigious routes such as long-haul flights. Its fleet is composed of Airbus A320s and Boeing 777-200 ERs, leased from Singapore Airlines. And instead of offering flights to Sandakan (Malaysia), Balikpapan, Pontianak, and Makassar (Indonesia) or Davao (Philippines) - they are all desperately looking for more international connections - the airline’s management found it 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 (Origin & Destination) 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 the neighboring cities of Kota Kinabalu and Miri and also in Kuala Lumpur - slowly made Brunei national carrier’s own regional network moribund and its proposed fares rather expensive.

The airline is paying the price now 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 though 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, and 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 neighboring Celebes and Mindanao Islands. Opening new routes in a circle of up to three or four hours around Brunei and offering a more competitive fare structure matching low-cost airlines, could dramatically change RBA's 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 passengers. RBA management’s announcement this week certainly marks the end of a dream, but probably also of an increasingly frightening nightmare.

Comments

Anonymous said…
Controversial remarks. But on the whole, I agree. I never saw much use for RBA flights to Frankfurt. How many Bruneians would fly to Frankfurt & how many Germans would fly to Brunei. Relatively few I suspect. I could say the same thing about flights to Japan etc.

I suspect the principle flight routes to be retained would be Singapore, London, KL perhaps Bangkok & Manilla.
Anonymous said…
I agree. Kesian. someone need to turnaround RBA. Their strategy is no longer applicable in the current air industry.
I think they knew that they are loosing heavily but still don't
want to admit it. They continue to invest so much on unattractive destinations and yet fail to deliver. Something wrong with their strategy and so much escalation of commitment on this strategy. What are the B.O.D doing? In
opinion there is just too many high level positions
In RBA compare to other regional airlines.
Anonymous said…
Those of us who work in the industry know that there were/are a number of routes that were not at all profitable.
These decisions to drop certain routes may be steps toward mitigating further losses. The poor performances of these routes and RBA itself needs to be looked at from a wider perspective, taking into account things like tourism and strategic marketing which should align to the overall aspiration for the nation itself.
Anonymous said…
Brisbane was an interesting choice to drop: every week those flights bring in dairy and fresh produce to our supermarkets- how much will these prices go up? There are thousands of Bruenian students studying in Brisbane. And what about all the people outside RBA who will be affected: hotel workers and tour operators (no longhaul transit passengers) and property owners (no expats to rent houses to). These cuts will badly affect the local economy in ways that weren't properly thought out.

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