By Datuk Ts Dr. Hj Ramli Amir, former President of the Chartered Institute of Logistics and Transport (CILT) Malaysia and Vice-President of CILT International for Southeast Asia
KOTA KINABALU: Passengers in Sabah and Sarawak have grown frustrated with Air Borneo’s delays, cancellations and sudden schedule changes in recent weeks.
The airline has apologised and warned that disruptions will continue as several aircraft undergo concurrent maintenance, while regulators monitor the situation and remind consumers of their rights.
Behind the headlines, however, lies a deeper story: Air Borneo is operating in one of the world’s most unforgiving industries.
Globally, airlines are notorious for razor-thin profit margins. Even in good years, many carriers earn only 2–5 per cent on revenue, far below what other industries consider acceptable.
The reasons are structural. Airlines shoulder massive fixed costs – aircraft leases or loans, maintenance facilities, IT systems and regulatory compliance – that must be paid whether planes fly full or half empty.
Labour adds another heavy layer: pilots, engineers, cabin crew and ground staff are highly trained and cannot be hired and fired at short notice without compromising safety or service.
On the revenue side, airlines operate in an environment where passengers are extremely price-sensitive, and competition is fierce.
Online platforms make fares transparent, so any attempt to raise prices risks losing customers to rivals.
At the same time, capacity must be planned months in advance. When demand softens or competitors add more flights, the typical response is to discount heavily to fill seats, eroding already slim margins.
Fuel and currency swings make matters worse. Fuel can account for a quarter or more of an airline’s operating costs, and its price is set in volatile global markets.
Many leases and maintenance contracts are denominated in strong currencies, while most tickets in Malaysia are sold in ringgit. A weaker ringgit or higher oil price can quickly turn a marginally profitable operation into a loss-making one.
Air Borneo faces all these headwinds and more. As a Sarawak-owned airline, it has been tasked with improving connectivity within Borneo, including taking on rural air services that are essential for remote communities but rarely commercially viable.
At the same time, it operates on busy routes where it must compete against established low-cost carriers and national airlines with larger fleets and lower unit costs.
This dual role – part public service, part commercial airline – puts Air Borneo in a financial squeeze.
Thin rural routes seldom cover their costs without subsidies or cross-subsidies, while trunk routes are already crowded and highly price-sensitive.
Unlike larger groups, Air Borneo lacks the economies of scale in its fleet, maintenance, and marketing that help spread overheads, so its cost per passenger is likely higher.
The recent wave of disruptions shows how quickly operational issues can tip such an airline into deeper trouble.
Air Borneo has cited unscheduled technical work, scheduled maintenance and delays in securing spare parts as reasons for grounding several aircraft.
For a small carrier, losing even a few planes sharply reduces capacity and aircraft utilisation, while fixed costs – leases, salaries, overheads – keep running. Each cancelled or delayed flight means not only lost revenue but also extra costs for rebooking, refunds, accommodation, and customer service.
Reputational damage is another blow. Passengers who experience repeated delays and last minute cancellations may simply switch to other airlines, forcing Air Borneo to cut fares or accept lower load factors. In an industry where profitability depends on keeping planes as full as possible, that is a dangerous spiral.
Air Borneo’s current turbulence is therefore more than a story about one airline’s missteps. It highlights a broader paradox: aviation is vital to regional development and connectivity, yet the business of running an airline is structurally precarious. Unless social obligations, subsidies and commercial discipline are carefully aligned, even well-intentioned carriers can quickly find themselves flying deep in the red.
