Malaysia Airlines mulls starting budget airline
MALAYSIA AIRLINES may be the latest to join the low-cost airline bandwagon in Southeast Asia.
The airline said it can roll out its own low-cost no-frills airline within six months if the present aviation ground rules change and its competitiveness is threatened. Other regional carriers has also shown interest in the joint venture, but even if the situation warrants it. The airline is facing a price war on domestic routes to the Malaysia’s no-frills carrier, AirAsia. Acknowledging this, Managing Director Ahmad Fuaad Dahlan said, “Malaysia Airlines is not likely to go as low as US$ 3.”
“That is not our terrain and we don’t want to go mud wrestling over fares. We are not predators chasing rabbits. Our fares are super-savers. At this time the fares have not impacted us that much,” he added.
Should Malaysia Airlines decide to convert all its domestic flights from full-service to no-frills flights, stiff competition over the country’s skies for domestic passengers is likely to ensue.  AirAsia will be hard pressed to offer flight connectivity and superior ground service.
Tony Fernandes from AirAsia, in a press briefing, said it does not make economic sense for Malaysia Airlines to enter the no-frills price market. “Both airlines should instead work together to see how to turn Malaysia into an aviation hub. From day one I have been saying Malaysia Airlines and AirAsia should work together. AirAsia cannot be a full-fare airline because we do not have a frequent flyer program, and we don’t show in-flight movies,” Fernandes said.
He advised that Malaysia should “compete with Singapore Airlines instead.”  “For the past three years we have been trying to hold a meeting with Malaysia Airlines, but there has been no response,” he added.
The spat between the two airlines comes after the recent release of an aviation sector report by a transport research study which concludes budget carriers need to keep costs low and choose the rights markets if they want to survive in a market which may see as many as six no-frills airlines go out of business in the next two years.
“In Europe and the USA, about 90 percent of airline start-ups have failed and I see no reason why that should not be so in Asia, “ said Kevin O’Conner from CLSA Asia Pacific Markets.
This follows a recent announcement by Tiger Airways, Singapore Airline’s budget carrier subsidiary, which promises “the lowest prices”. Tiger Airways will be offering fares as much as 60 percent below regular airfares now offered by Singapore Airlines and Qantas. Tiger is taking to the skies in a market now dominated by Valuair and AirAsia.
Tony Fernandes dismissed competition from the Singapore budget carriers. He said: “They cannot fly passengers from Changi to Paya Lebar airports like we can do with our domestic airports.”
AirAsia’s specializes in flying to domestic destinations from its hubs at Kuala Lumpur International Airport and Senai Airport in Johor Baru to destinations formerly serviced by national carrier Malaysia Airlines, or new regional international destinations.
eTN Malaysia
author: Y. Sulaiman
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July 30, 2004
Posted in: Airlines & Railways