PRESENT POINT POWER

The CEO of AIRASIA has refuted talks that a low budget carrier has made fresh bids to fly to Singapore. He said that Singapore was one of the routes Airasia is interested in; the island state was not a priority destination.

AirAsia Bhd will not raise its air fares following the move by national carrier Malaysian Airline System Bhd (MAS) to hike fares on domestic routes.

The increase was unavoidable because of rising fuel prices for it to stay afloat. MAS managing director Idris Jala announced Monday that the airline's domestic fares for business class will be increased by 25 per cent and the economy class by 15 per cent effective Aug 15.

The fuel surcharge was also increased to RM15 effective Tuesday.

Many will fly budget airline AirAsia or travel by car, bus or train. This is welcoming news to most travelers as they can now rely on Air Asia for cheaper tickets. But for many at certain route sectors, there is no choice as Air Asia do not covered all the MAS routes.

AirAsia's has started operating all the 99 local routes under the Government¡¦s domestic air services rationalisation plan. The airline started flying to Brunei on July 11. With its new regional routes on line - services from Malaysia's Sabah state to China's Xiamen and Shenzhen by the end of this year. And flights to India by next year its passengers numbers will rise 67% by 2007
read on for the details

AirAsia Says Passenger Numbers to Rise 67% in 2007

Updated : 04-08-2006 : Bloomberg Story By : Wahyudi Soeriaatmadja via www.biznewsdb.com

Aug. 4 (Bloomberg) -- AirAsia Bhd., Southeast Asia's biggest low-fare carrier, expects its passenger numbers to rise 67 percent to 15 million in the year ending June 2007 as it adds routes to meet travel demand, Chief Executive Officer Tony Fernandes said today.

The airline, based in Sepang, outside Kuala Lumpur, likely flew 9 million passengers in the fiscal year ended June 30, Fernandes told reporters today. The company has yet to report earnings for the 12 months to June.

”A large part of our growth is foreign tourists,'' Fernandes said. “Many foreigners are now using AirAsia as we market'' Southeast Asia “as one tourist destination. For instance, a lot of Koreans and Japanese going to Brunei have two or three stops within'' the region.

AirAsia, which last month agreed to buy 40 more Airbus SAS A320 planes for about $2.6 billion, is expanding its routes to win over passengers and keep its lead among at least 18 discount carriers in the region. The airline started flying to Brunei on July 11 and plans to begin services from Malaysia's Sabah state to China's Xiamen and Shenzhen by the end of this year. It is seeking flights to India by next year.

AirAsia is able to speed up the introduction of new international routes after the government last month agreed to include the carrier in its bilateral talks for air rights.

The airline expects about 3 million passengers of the 15 million passengers will travel routes in Indonesia. About 2 million of the 9 million travelers in the year ended June 30 also flew Indonesian destinations.

"We are very keen to go to Pelambang, PekanBaru, Sumatra to have a daily flight and increased frequency flying to Jogjarkarta"

AirAsia soon plans to introduce new routes in Indonesian cities including Palembang and Pekanbaru in Sumatra, he said.

Aside from the 40 Airbus planes, AirAsia also has an option to acquire as many as 30 more aircraft. The order is in addition to the 60 planes it placed in March 2005.

AirAsia has carried over 20 million passengers since it started operations five years ago, the company said in an e-mail statement today.

Fare buckeT' scheme for MAS

Updated : 02-08-2006 ;Media : The Star ;Story By : B.K. SIDHU
via www.biznewsdb.com

PM Datuk Seri Abdullah: "If MAS continued to offer low fares even after fuel prices had gone up, it would lose and that would put it in difficulty," he told reporters.
"I think MAS has done its homework and knew that the fare increase has to be done to avoid losses and other problems," he added.

Now one of the other problems is the MSS (Mutual Separation Scheme) whereby MAS is compensating employees leaving with golden and diamond handshakes (check the details at Lim Kit Siang Blog)

PETALING JAYA: Malaysia Airlines (MAS) kicked up so much fuss over the floor pricing for domestic airfares that the Government had to lift it. But instead of lowering fares, the national carrier announced a weighted-average fare hike for the 22 routes which takes effect in two weeks.

So much for giving rival AirAsia a run for its money with competitive pricing.

Contrary to market perception that AirAsia would follow suit in raising its airfares, group chief executive officer Datuk Tony Fernandes said the no-frills carrier had no such plans, at least for now.

”We are not raising our airfares” Fernandes told StarBiz via SMS.

Yesterday was AirAsia's first day operating all the 99 local routes under the Government¡¦s domestic air services rationalisation plan. Asked how the airline managed day one with the increased number of routes, frequencies and passengers, Fernandes said it was “perfect”.

”We are thrilled and sales have never been better” he said.

While Fernandes may be delighted with the roaring sales the airline is experiencing, MAS is highly unlikely to out-price itself, given that it is after the same leisure and business travellers markets as AirAsia.

This is despite the MAS announcement on Monday that effective Aug 15, its weighted-average fares will be increased by 15% for economy class and 25% for business class for the 22 routes.

However, it was also reported that MAS would launch its cheapest domestic fares ever to be sold via its revamped online booking..

While MAS is keeping the final pricing close to its chest, the team working out the fares would likely come up with seven to nine buckets - seven for economy and two for business class. (Fare bucket refers to the allocation of a certain number of seats at a certain fare.)

A meeting to decide on the fares is likely to be held over the next few days and an announcement expected on Aug 15.

An analyst, who did his own math based on the proposed percentage rise, expects one-way economy airfare including taxes to Penang from KL International Airport (KLIA) to cost RM227 from RM184 currently, reflecting a 23.2% increase.

Fares for other routes such as KLIA to Johor Baru are likely to be RM207 (from RM167), KLIA-Kuching RM377 (from RM309), KLIA-Kota Kinabalu RM579 (from RM484) and Kota Kinabalu-Labuan RM105 (RM78).

”MAS would start quoting domestic fares in seven fare buckets, emulating AirAsia¡¦s tactic for attracting public attention. Early birds would secure below-average fares while late bookings will be subject to higher-than-average farr” the analyst's report said.

The analyst noted that fares for bookings closer to departure dates would increase much more than an average 23.4% and the weighted average revenue enhancement was probably just over 13% because seat capacity would be cut.

MAS is reducing weekly frequencies from 1,783 to 1,182. The report said the reduced “system-wide capacity and the higher average domestic fares MAS (would impose) are clearly beneficial to AirAsia, as it can absorb the spill-over of passengers unhappy with MAS” price hikes and (AirAsia can) gradually increase its average fares.

However, it added: “MAS will also gain as the impact on the national carrier should be positive as lower frequencies and higher fares mitigate the domestic route losses, which MAS must consolidate from Aug 1”

That aside, Fernandes said the MAS proposal for a fare hike “only proves that for years AirAsia has suffered while MAS' domestic operations were paid for by the Government as their pricing was not commercial.'

”Now (that the 22 routes) are in their profit and loss, MAS has to be commercially (oriented). And that is great news for AirAsia because we can now truly grow as there is fair market competition.”

Shares in MAS gained three sen to RM2.83 while AirAsia edged up one sen to RM1.29 in yesterday’s trading.

www.biznewsdb.com

and read the dissatisfactions in NST

MAS airfare hike given the thumbs down
02 Aug 2006

SEPANG: The domestic fare hike by Malaysia Airlines (MAS) did not go down well with Malaysians.

They say they will fly budget airline AirAsia or travel by car, bus or train. They also think that it is unfair to pass the high cost of oil to the public.

MAS is raising its economy class fares by 15 per cent and business class fares by 25 per cent from Aug 15.

S.M. Rajah, manager of an IT company in Kuala Lumpur, said the move would deter people from flying with the national airline.

"The increase is steep. Who wants to spend so much to fly locally when alternatives are available?"

Rajah, who was at the KLIA to go to Brisbane, said he flew with MAS twice a month. "Now, I would have to consider other ways of travelling," he said.

Teoh Yang Ming, a goldsmith, said it was unfair for MAS to hike the fares so much to recover its losses. "They should not pass the buck to consumers."

Businessman Alwi Abdul Karim said he would switch to AirAsia to visit his son, who was studying in Bintulu.

"We used to fly MAS to visit him and vice-versa. Now, we have no choice but opt for cheaper alternatives."

Businesswoman Noorshilah Rusli is saddened by the increase and said she would look for cheaper transport.

"Such a drastic increase will hurt my pocket as I travel a lot around the country. Now, I will have to take AirAsia."

Ryan Song, marketing manager of a company in Kuala Lumpur, said MAS should have increased its fares gradually.

He said the airline should justify the higher fares by offering better service and quality meals.

Retiree Diana Kok said the hike would affect the middle- and lower-income people.

"The rich will not feel the pinch. They can still fly on MAS," said the 65-year-old who had just arrived at the KLIA from the US.

Malaysian Association of Tour and Travel Agents (Matta) president Ngiam Foon said the higher fares would not have an adverse effect on MAS.

He said offers given by MAS from time to time would cater to those looking for cheaper travel.
____

NST Editorial: Room enough for two 02 Aug 2006

FOR a Malaysia Airlines once sinking deeper into the red, government price controls, particularly for domestic flights, were like a diver’s weight belt around an already obese waist.

Thus, after the much-needed and hard-won cost-cutting to get back into operational shape, the national carrier must count the Transport Ministry’s agreement not to interfere in the way it sets fares as a major and long-sought-for victory.

On Monday, as it announced a route rationalisation plan that substantially reduces its obligations to fly to every far-flung corner of the country, it duly exercised its new freedom — by raising ticket prices for the first time in 14 years.

The increases are far from arbitrary, however. Dearer oil, which has caused fuel surcharges to go up three times this year, was bound to pummel the consumer sooner or later, and airlines worldwide have got badly burnt by choosing delay in a vain attempt to hold on to passenger volumes.

Even so, managing director Idris Jala says that "only part of the rising cost is being fobbed off, leaving air travel by MAS in Malaysia still one of the cheapest around"

From Aug 15, economy and business class fares will be jacked up by 15 and 25 per cent respectively, to accurately reflect what it takes to balance its accounts this year and turn a small profit in 2007.

Higher ticket prices alone aren’t going to solve MAS’s woes in the low-margin domestic sector. One of Idris’s predecessors, Tan Sri Abdul Aziz Abdul Rahman, told the NST that with load factors of up to 95 per cent required to break even, the super-frilly MAS wouldn’t stand a chance against its no-frills competitor, AirAsia.

A rejigging of costs to prices could sweeten the numbers, but Idris’s no-nonsense management team will have to rely even more on their flag-bearer’s built-in advantages, such as "weather-proof access to aircraft, allocated seats, more legroom and free refreshments on board".

For AirAsia, the Transport Ministry’s removal of MAS’s "floor price" brought on an intimation of any budget carrier’s worst nightmare — a price war. Monday’s announcement, however, showed how such worries are moot, for now if not for the long haul.

Even with maximum liberalisation, full-service carriers would have to be unscrewed bolt by bolt and rebuilt from wrought iron before they can come close to the fleet-footed nimbleness of the likes of AirAsia. For the time being, the division of the market between it and MAS looks just about right.

AirAsia Plans China Flights This Year, India in 2007

Updated : 02-08-2006 Media : Bloomberg Story By : Stephanie Phang via www.biznewsdb.com

Aug. 2 (Bloomberg) -- AirAsia Bhd., Southeast Asia's largest low-fare carrier, will start flights from Malaysia's Sabah state to China's Xiamen and Shenzhen by the end of this year after winning government approval for the routes.

The airline, based in Sepang, outside Kuala Lumpur, aims to fly to six Indian cities, starting with two destinations next year, Tony Fernandes, AirAsia's chief executive officer, said in a telephone interview in Kuala Lumpur today.

AirAsia is able to speed up the introduction of new international routes after the government last month agreed to include the carrier in its bilateral talks for air rights. International air traffic in China and India, the world's two most populous nations, may expand 10 percent in 2006, leading Asia's growth in passenger traffic, the International Air Transport Association said in February.

``It has opened up a whole list of possibilities for us and we're excited,'' Fernandes said. The government has given AirAsia ``routes that we never dreamt of getting before.''

The move by the Malaysian government came after it removed the floor prices for Malaysian Airline on some domestic routes, which allows the carrier to offer cheaper fares, a move opposed by AirAsia.

The government has approved the two China routes from Sabah and has given AirAsia permission to apply for routes to India, he said. Negotiations for rights to China and India tend to take long, the carrier said in July.

Singapore-based discount airline Tiger Airways Pte flies to Guangzhou, Haikou and Shenzhen. No-frills airline Jetstar Asia, which combined with Valuair Ltd. last year, flies to Bangalore.

Singapore Flights

AirAsia is still considering flying to Singapore, Fernandes said. The Malaysian airline, which had failed to secure landing rights from Singapore in its previous bids to fly to the city- state, has submitted a request to the Malaysian government, which will help it negotiate landing rights with relevant authorities overseas, the Business Times reported yesterday, citing an unidentified official.

``There's a huge potential for AirAsia there,'' Fernandes said today, declining to say if he is reviving efforts to fly to Singapore. ``We're looking at all routes and Singapore is one of them, but our focus right now is more China and India.''

AirAsia is negotiating with Malaysia Airports Holdings Bhd. for ``substantially lower'' airport landing and parking charges at the low-cost carrier terminal in Sepang, he added. Passenger service charges and airport taxes for domestic passengers should also be cut, he said, without elaborating.

Fleet Expansion

AirAsia agreed last month to buy 40 more Airbus SAS A320 planes for about $2.6 billion and has an option to acquire as many as 30 more. The order is in addition to the 60 planes it placed in March 2005.

The airline may exercise its option to buy the additional 30 planes soon, Fernandes said. ``In our planning, we believe we can absorb those 30 very quickly,'' he said. The airline doesn't have enough planes to immediately start flying to the two China routes it seeks to serve this year, he said.

The airline is ``comfortable'' with its current fuel surcharge, until fuel prices rise to $100 a barrel, he said.

Jet fuel traded at an average of $85.39 a barrel in Singapore in the three months ended June, 26 percent more than the same period a year earlier, according to Bloomberg data. The price of jet fuel has risen as much as 27 percent this year to a record $90.35 a barrel on July 17

from Busineee Times
Above: From Left: Tan Sri Abdul Azia (former MAS Chairman); Tunku Iskandar (Past President MATTA), Ms Estee Ng, Air France- KLM Manager

Who wins in Malaysia-Singapore open skies pact?

By Kang Siew Li August 2 2006

AIRLINE passengers and Singapore's aviation industry are likely to emerge as the biggest winners and Malaysia Airlines (MAS) the biggest loser if Malaysia and Singapore were to sign an "open skies" agreement.

An open skies agreement give airlines in the nations unlimited rights to fly between each other's borders.

As budget airline AirAsia Bhd prepares to make a fresh attempt to secure landing rights in Singapore, speculation is rife that an approval will also lead to Malaysia granting an approval to a Singapore carrier to fly to Malaysia. This could eventually lead to an open skies pact with Singapore.

However, travel professionals are divided over the move towards opening up Malaysia's skies to Singaporean carriers, with some saying that MAS could be hurt by the competition just when it is making big improvements in turning itself around.

Former MAS managing director and chief executive Tan Sri Dr Abdul Aziz Abdul Rahman said he is against Malaysia signing an open skies agreement with Singapore as it puts Malaysia at a significant disadvantage.

"Malaysia is different from Singapore. And what do we get from Singapore? An open skies policy is detrimental to our national interest," he told Business Times.

"Singapore has always been asking for it (open skies) because it is to their advantage. They are already an aviation hub," he added.

Abdul Aziz believes that Singapore Airlines (SIA) will syphon away passenger traffic from Kuala Lumpur as it offers a wider network of destinations compared with MAS.

In addition, Singapore has open skies pacts with countries such as the United Arab Emirates, the US, Australia, New Zealand, Brunei, Chile and Peru, unlike Malaysia.

"With the open skies pact with Malaysia, they (SIA) can then pick up passengers while on transit in Malaysia to fly to other destinations. This will make MAS more miserable as it is in no position to compete in Singapore," he said.

On allowing low-cost carriers (LCCs) such as AirAsia to operate the Kuala Lumpur-Singapore route, Abdul Aziz said it will likely result in MAS losing three-quarters of its passengers to AirAsia.

"This will make MAS even more miserable," he added.

Malaysian Association of Tour and Travel Agents (Matta) immediate past president Tunku Iskandar Tunku Abdullah said he favours open skies between Malaysia and Singapore as it would help sustain and increase the flow of Singaporeans to Malaysia.

"Right now, the airfares between Singapore and Malaysia are artificially high in comparison with fares from Singapore to Bali, Manila and Bangkok or Kuala Lumpur to Bali, Manila and Bangkok.

"The consequence of this is more and more Singaporeans will opt to travel to other cheaper destinations such as Bangkok and Bali rather than Malaysia.

"Thus, a liberal aviation policy is necessary for our tourism industry because 60 per cent of our arrivals into Malaysia are Singaporeans. We need to keep them here or keep them interested to come here and make it more affordable for them to come here," he said.

Tunku Iskandar also believes that MAS will be able to compete with AirAsia.

"MAS provides frills and has to position itself at a different level. It should focus on the business and higher-end traffic between Malaysia and Singapore.

"It is not going to compete with the holidaymakers because it is going to lose out anyway. There will be reduced number of people flying to Malaysia because of cheaper alternative destinations," he added.

Air France-KLM country manager Estee Ng sees passengers benefiting from an open skies agreement between Malaysia and Singapore as Singapore provides more direct connectivity to other countries around the world.

However, an unlimited open skies arrangement with Singapore would be less favourable to Malaysia's aviation industry.

"Such a pact would strengthen Singapore's aviation industry because foreign airlines that are already operating in Singapore can equally capture Malaysia's business from Singapore as there would be a good feeder service then," she said.

Ng said, however, it could work a different way.

"If Malaysia were to package itself right, it could in turn attract more foreign carriers into Malaysia and those carriers don't have to go to Singapore because then you have so much connections into Singapore. It is also cheaper to operate in Malaysia.

"But this will be a difficult task because Singapore has long established itself as an aviation hub. The number of transit passengers in Singapore is more than Malaysia," she said.

On opening up the Kuala Lumpur-Singapore route to LCCs, Ng said there will be an impact on network carriers like MAS and SIA.

"But so far, we (full service carriers) have learnt to co-exist with the LCCs," she added.