China Airlines - Orient Aviation

news backgrounder
The gloves are off
There’s nothing new about fare
wars in the airline business. But
when Malaysia Airlines last month
hit the market with 1.3 million
free tickets – excluding taxes – it
sparked a major turf war with local
low-cost carrier AirAsia,
reports TOM BALLANTYNE.
Ex a c t ly t wo ye a r s a go
Malaysia Airlines (MAS)
ch ief exe cut ive, Id r is
Jala, and his low-cost carrier
counterpart, AirAsia
chief executive, Tony
Fernandes, were phot
og r a phed shaking
hands, broad grins on
their faces, celebrating a
government-ordered deal
that would see them cease
damaging competition and
work together for the good
of the country’s aviation
industry. “Flying together”
declared local newspapers.
How times have changed.
When Jala announced last
month he was putting 1.3
million “zero-fare” domestic
seats up for grabs – tickets
had to be booked by May 19 for
travel between June 10 and December
14 - Fernandes was not amused and
accused MAS of “unfairly” venturing into
his budget business.
“MAS and AirAsia will go to war and
the only beneficiary will be Singapore
Airlines,” he declared.
Jala, having brought MAS back from
the brink of bankruptcy to record profits
in two years, is unrepentant. According to
sources he will soon extend the zero fare
offer to destinations outside Malaysia, to
ports within Asean (Association of South
East Asian Nations). Fernandes’ criticism,
he said, is unwarranted.
“Our ‘Everyday Low Fares’, launched
to offer zero fares to all domestic destinations,
is meant to create new demand and
to encourage people who are not planning
to travel to do so. The new product is also
aimed at boosting domestic tourism and
countering inflation,” said the MAS boss
in a statement.
MAS was making money from seats that
otherwise would go unsold. “On average,
domestic MAS flights are only 70% full.
So the remaining 30% would not have
been sold anyway. By offering zero-fare for
these seats it’s giving us some incremental
revenue,” said Jala. “It’s profitable in the
sense that rather than letting them go empty,
we have some revenue for them.
“AirAsia has always said they have
created new demands from low fares and
War of words: MAS and AirAsia bosses,
Idris Jala ( left) and Tony Fernandes
no longer “flying together”
I entirely agree with them. When we come
out to do this, we are also creating new
demand.”
Fernandes claims the move means MAS
is now competing directly with his LCC
model, but at the same time he is not allowed
to compete against the national airline. This
is a reference to the fact that while AirAsia
and other LCCs were cleared for the first
time earlier this year to operate limited
flights on the previously MAS-Singapore
Airlines monopolised Kuala Lumpur
to Singapore route, AirAsia hasn’t yet
been given permission to fly from other
Malaysian cities to Singapore.
“The first thing they should do is to
allow us to fly more flights to Singapore,”
said Fernandes. He said MAS should work
together with AirAsia instead of competing
and accused the full service airline
of “surrendering” to Singapore Airlines
(SIA). “Our two airlines are dedicated to
turn KLIA [Kuala Lumpur International
Airport] into a major Asian hub again.
MAS should join us in this mission,” said
Fernandes.
Jala’s rejoinder is that AirAsia should
take advantage of the several open skies
agreements Malaysia has with the U.S.,
the United Arab Emirates, New Zealand,
Taiwan and Scandinavian countries.
“AirAsia is free to fly to any of these
destinations. Malaysia has also liberalized
agreements with countries
such as China, the
Maldives, Britain and
Germany. AirAsia is
also free to fly to these
destinations,” he added.
Apart from the verbal
attack, Fernandes isn’t
taking the fare attack lying
down. He countered the
MAS campaign with two
new initiatives: AirAsia
will pay the difference to
any of his passengers if they
can find any MAS airfare
that is lower than the cheapest
offered by AirAsia and what
he called a “sub-zero fare”
campaign, details of which were yet to
be announced.
Fernandes said he was “very flattered”
by MAS’ initiative because it was a copy
of what AirAsia had been doing. “This is
the 10th time that MAS has copied us. I
guess imitation is the best form of flattery,”
he said.
And he boasted that AirAsia has “newer
aircraft, better and hot food – although
passengers have to buy meals on board
– better seats which are more spacious and
we definitely have better crew ... we also
have more frequency to local destinations
and more point-to-point routes.”
Besides, said Fernandes, AirAsia had
started selling hot roti canai (a popular
Malaysian flatbread) on board flights and
would introduce chicken rice and satay
soon. Over to you Mr Jala! ■
22 ORIENT AVIATION june 2008