Dermot Mannion, the deputy chairman of Royal Brunei Airlines (RBA), is no stranger to taking tough decisions.
As CEO of Irish flag carrier Aer Lingus from 2005-2009, Mannion guided the airline through its public flotation in 2006, faced the difficult task of axing jobs as part of a cost-cutting programme and fought off two hostile takeover bids by Ryanair.
It was perhaps little surprise then that he was chosen by the Brunei Ministry of Finance to spearhead the restructuring of the national carrier in 2009 following the global economic crisis.
In June 2011, he launched its Stabilisation Plan, which saw the carrier suspend its route to Kuching from July 28, 2011, and to Auckland, Brisbane, Perth and Ho Chi Minh City from October, as part of efforts to increase profitability on remaining routes.
The inevitable result was job losses and, according to Mannion, the company had shed 25% of its workforce by June last year, but he believes the decision to “right size” the airline at that time was essential given the economic climate.
“What we found was we were competing in a marketplace that was very difficult for us to compete in, which is the Kangaroo traffic between Europe and Australia,” Mannion concedes.
“We were coming up against some very significant competitors like Emirates, who I used to work for, Etihad and Qatar, we felt that wasn’t a marketplace that we should be focusing on – we needed to look more to routes that are more strategically important for Brunei in terms of our ability to deliver traffic,” he explains.
With this in mind, RBA has focused on core routes that could deliver a strong O&D market.
In order to be “more strategic, more niche”, the airline retained its network of services to Dubai, Hong Kong, London, Jeddah, Kuala Lumpur, Manila, Kota Kinabalu, Melbourne, Jakarta, Singapore, Bangkok, and urabaya, and in 2011 it launched weekly services between Brunei and Melbourne, before upgrading it to a daily flight on March 30 this year.
“In addition to that, around the region of South East Asia, we have an extensive route network covering all the countries in our region you would expect us to be in: Singapore, Malaysia, Indonesia, Hong Kong, Shanghai in Mainland China and Manila, so we cover those, and that provides us with an opportunity to feed both short-haul on to long-haul and long-haul on to short-haul.”
This ability to feed traffic has been an important factor in RBA’s network strategy. A codeshare with Malaysian Airlines allows it to tap into the market of its bigger neighbour and it has agreements in place with Dragonair, Garuda and Thai Airways.
“If we want a strategic long-haul airline that is important for Brunei, as we should have, we really need to try to build a network around that so that in the times of the year when there isn’t enough Brunei traffic to support the various routes that we’ve got we can feed it from other places, so it’s a question really of balancing traffic,” Mannion says.
“We will always favour point-to-point traffic into Brunei over connecting traffic, but at different times of the year if that traffic is not available we have to find an alternative, so you need a balance between the two, between a hub carrier and a regional carrier.”
However, he rules out cementing these agreements with membership of a particular alliance. Having withdrawn Aer Lingus from the oneworld alliance and previously worked at Emirates, Mannion believes a small carrier like RBA risks losing its voice in a larger grouping.
“I think it’s very difficult for small carriers in alliances despite the PR. I think the reality is it’s very difficult for small airlines in alliances; there can be costs in terms of systems integration which can be disproportionately high for small carriers and revenue benefit is never particularly certain. Small airlines tend not to have a great influence o I would always advise caution if they are considering entering alliances,” he says.
But realigning RBA’s route network is just part of Mannion’s vision for returning the airline to a state of profitability. As part of its efforts to raise its profile, RBA has hired a number of rebranding experts in Singapore to come up with a unique image to fit with its niche model.
The carrier has also gone on the road to promote itself, with Mannion personally launching a UK tourism campaign at the Westfield shopping centre in London’s Shepherds Bush in May, where he was joined by BBC presenter and explorer Benedict Allen, who has previously trekked through the rainforest of Brunei.
The carrier has even taken to using one of London’s iconic vehicles, the Hackney cab to promote the destination of Brunei, with advertising on 20 of the cars, a move that will no doubt allow for maximum exposure during the London Olympics. Other campaigns have been launched in its target markets, including in China.
One of the key messages, which RBA hopes to get across to potential customers through these campaigns, is that the tiny nation offers a destination, which, thanks to its pristine tropical rainforest and lack of large-scale tourism, is unique in South East Asia.
“Tourism is really underdeveloped in Brunei; it is really an undiscovered treasure, we would say, so we see potential both around the region of South East Asia and long-haul network to promote more inbound tourist traffic than we see today and in fact for the first time Brunei Tourism and RBA are working together.
“As a deeply conservative country with a long history and a monarchy dating back to the 14th century, Brunei offers something a bit different to its frenetic larger neighbours Malaysia and Indonesia, with quiet country retreats and the peace and quiet are big attractions for visitors,” ays Mannion.
Yet it still has its modern side, hosting a golf and tennis open each year along with other sports, including boat racing, football and darts.
“There are some tourism markets that have reached maturity but in Brunei it’s really in its infancy. But there is a lot going for us: a very natural, peaceful environment, the rainforest is 20 minutes from the airport,” the airline boss enthuses.
Having established a clear network strategy, branding and the right focus on the destination, the other clear priority for Mannion is retaining and improving customer service and comfort.
And the airline has a perfect opportunity to realise this ambition, thanks to the fact it is going to be the first carrier in South East Asia to receive a B787 Dreamliner.
The carrier has five of the new large aircraft on order, which will replace its fleet of six B777-200ERs by 2014, and Mannion believes these offer the opportunity to enhance the long-haul passenger experience.
“We think it’s going to be a big hit; the travelling public are going to like the ambience of the cabin, the size of the window and overall it’s going to be a better environmental experience I would say for the customer.
“And secondly, in terms of fuel cost, we are hoping it is going to be 20% more efficient per seat than the B777 seats we currently operate; put those together in a time of high jet fuel costs we think it’s going to be a winning combination,” he says.
RBA’s base, Brunei International Airport, is going through a period of modernisation which will see a new terminal and cargo terminal constructed by 2013/14 and capacity raised from 1.5 million to 3 million and Mannion believes the works will also help the airline to achieve its long-term objectives.
“The airport terminal needs to be upgraded and modernised and there is a modification programme that has just been started; the Brunei government has invested $250 million in upgrading the terminal, which is perfect because, by early 2014, we will have a refleeted RBA with B787s flying long-haul, a modernised terminal facility and rebranding exercise completed so we will be in a much stronger position in the market than we are today.”
This article features in Routes News 2012 Issue 5