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Airline price war in Malaysia: Thunder before the lightning?

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Yusof Sulaiman, eTN Malaysia  May 16, 2008

KUALA LUMPUR, Malaysia (eTN) –Malaysian air travelers have never had it this good--while theprice of fuel keeps going up, airfares keep going down. The stakes have now been raised further to include ticketprices for international flights.

Is the latest salvo from the price war an omen that is difficult to contemplate?

But, watching from the sidelines and not waiting further for the remnants of the airline "turf" war to fall by the wayside, Malaysian Transport Minister Ong TeeKiat, has promised to act following the latest outburst from AirAsia supremo Tony Fernandes that flag carrier Malaysia Airlines is threatening his airline's entire future existence.

Both carriers had gone on a price win to war for customers when Malaysian Airlines subsidiary Firefly announced it is offering "free flights" fordomestic destinations, followed by destination in ASEAN countries.

This was followed by Wednesday's announcement of similar offers toAsian destinations, while Malaysian based budget carrier AirAsia
countered by offering "free seats" to its international destinations.

"This is unfair competition," moaned Fernandes, while its advertising blurb claims it is now "creating an online chaos around the globe"with their offer of free seats to its international destinations campaign.

Despite rising fuel costs its fuel surcharge for international flights, Malaysian airfares are the lowest in the region.

Denying his carrier is involved in any price war, Malaysian Airlines head IdrisJala said, "We are releasing the 30 percent or so seatswhich would remain unsold during flights. It is excellent for theindustry and tourism, both local and within ASEAN."

Comparing Firefly's service to AirAsia, Idris addded that Firefly customers get five-star service while enjoying low fares. "We offer refreshments on board, convenient schedules, on time departures, 20-kg baggage allowance, allocated seats and many other benefits which you do not have to pay extra."

Indignant that Malaysian Airlines has encroached into his turf,Fernandes made a public plea stating thatMalaysian Airlines enjoysgovernment backing. He said he had "no qualms" about healthy competition, but"conflicts" between carriers should be minimized.

Fernandes claims unfair competition will "eat" into AirAsia's revenuebase of offering low cost flights. Despite its efforts to promoteMalaysia aggressively internationally and liberalization of thecountry's aviation industry, it is still not allowed to increaseflights to Singapore from other points in Malaysia, as well as fly tointernational destinations.

"AirAsia spent A$320,000 to promote Malaysia's tourism industry in Australia."

In a plea aimed at swaying the public opinion, Fernandes asked, "Thegovernment will never allow Malaysian Airlines to fail. But who isgoing to save us?"

"I will step in to investigate," MnisterOng told reporters . "I shall talk toboth parties to find out exactly what has gone wrong. We want toavoid unhealthy competition among local airlines, where in the endeveryone loses, including the consumers."

The "zero fares" campaigns offered by both Malaysian carriers refer topassengers paying only airport tax, fuel surcharge and administrationfees, available only through Internet bookings.

Airline price war in Malaysia: Thunder before the lightning?



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