New twist in airline airfare war
MALAYSIAN travel agents and some airlines are set to abandon the price-regulating market development program that sets the minimum price for airfares. “The program has been abolished due to the development of a more liberal air services policy, proliferation of low-cost carriers and plans by the government to introduce a national competition policy next year,” a statement from the consortium affirmed.
Travel agents will abandon the price-setting program beginning August 16, to be followed by participating airlines on November 1.
The move will now mean airlines and travel agents will be “free to determine airfares depending on demand and supply”.
For full-service carriers the new development comes at a crucial time, as higher operating costs due to rising fuel prices and lower fares by low-cost are likely to put a dent on their attempt to compete in the lucrative Southeast Asian market.
With this recent development, many are anticipating Malaysia Airline’s next move. Malaysia Airlines’ boss Fuaad Dahlan just last week said the carrier would roll-out low-cost airline “if the situation warrants it, and the rules change.”
If Malaysia indeed starts its own low-cost airline, it will go head-to-head with current market leader AsiaAsia, who is now mulling over its market IPO set for later this year, and purchase of additional planes on the back of new routes.
Market observers wonder how the abandonment of the price-regulating program will impact the ongoing price wars, with some saying fares are already low.
Meanwhile, the latest aviation climate has dampened enthusiasm in the airline stocks. Market analyst Chris Eng is “viewing it negatively” and downgrading it to a “long-term buy” because its average passenger yield will be lowered.
29 countries flying in the skies of Asia are members of the price-regulating program, in force since 1983.
eTN Malaysia
author: Y. Sulaiman
Travelvideo.TV – your news source for the travel and tourism industry.
August 9, 2004
Posted in: Airlines & Railways