Royal Brunei Outlines New Short-Haul Strategy

Royal Brunei Airlines  is adding Airbus A320s to its fleet next year and has confirmed that its new business strategy is to focus on short-haul rather than long-haul operations.

The carrier “is planning to add at least one extra A320 to the short-haul fleet in March-May 2012 to ensure the airline can offer a more consistent schedule and level of service on the regional network,” it says. RBA has no A320s on order, which means it is likely to be in the market to lease the aircraft.

Royal Brunei also says it remains committed to taking delivery of Boeing 787s, the first of which will come in 2013. The carrier has five 787-8s on order, according to the Ascend database.

The airline also has six Boeing 777s, which are leased from Singapore Airlines (SIA), but it no longer needs so many 777s because from Oct. 30, it will stop flying to Auckland, Brisbane, Perth and Ho Chi Minh City.

Executives at the airline says they are trying to persuade SIA to let RBA break the lease and return some of the 777s. The airline says extensive research it conducted earlier this year shows it “must realign its goals and focus once again on becoming a regional hub with strategic connectivity—a return to its roots. This means focusing on regional traffic and maintaining only the long-haul routes which are consistent with the airline’s long-term objectives.”

Royal Brunei says it is abandoning some long-haul routes because the research showed that only about 9% of the traffic on long-haul routes originates in Brunei or ends in Brunei. “This 9% are the passengers that contribute to Brunei’s local economy—the rest simply transit Brunei on their way somewhere else and offer little in the way of economic activity,” RBA says.

“In these circumstances, it has become impossible to justify the continuation of the route network in its entirety, where RBA is effectively providing subsidies to over 90% of the traffic, while creating little or no economic value either for the airline or the country.”

By comparison, about 75% of all passengers on its regional routes are based in or are visiting Brunei. “It is clear why RBA must focus on the regional market,” says RBA. “To continue to serve the routes that have been suspended, would cost RBA and Brunei far more than the economic benefit the airline or country would receive in return for keeping these routes open.”

The carrier admits there are arguments that the long-haul services should continue because the belly-hold space on the aircraft is important for transporting goods to and from Brunei.

But Royal Brunei says there is no rule that says freight requires a nonstop service. It says, “Daily connections via regional hubs should be more than enough to supply Brunei with all of the goods we currently enjoy.”