AirAsia wants a level playing field

BUDGET carrier AirAsia Bhd said a developing price war triggered by Malaysia Airline (MAS) could lead to its eventual demise, especially if it is not allowed to compete on a level playing field.

"There is a limit to what you can put us under. Oil prices are now US$159 per barrel. The government will never allow MAS to fail, but a private company? Who is going to save us?" AirAsia group chief executive officer Datuk Tony Fernandes told reporters in Kuala Lumpur yesterday.

He said AirAsia has seen sales grow by some 20 per cent since MAS launched its zero fare campaign for domestic destinations on May 5 2008.

"This is only a few days. MAS has announced that it is going to be an everyday campaign kind of thing. But we don't know what impact the campaign will have (on AirAsia) in the long term," he added.

AirAsia wants to be given equal rights to fly the Singapore-Kuala Lumpur air route, which is reported to be one of Asia's most lucrative and fourth busiest routes.

Currently, MAS has 69 flights per week between Singapore and Kuala Lumpur while AirAsia operates 14 flights per week.

AirAsia also seeks to fly from Singapore to other destinations in Malaysia such as Kota Kinabalu, Kuching, Langkawi and Penang.

Fernandes said it has applied to the government for more rights to fly to Singapore and is now awaiting the outcome.

The carrier also wants the government to do away with the subsidy granted to MAS for routes to Los Angeles, Paris and New York to help even the playing field.

It is understood that the subsidy amounts to as much as RM400 million per year.

"We are led to believe that MAS gets government subsidies to operate these routes. This raises questions about how you quantify that subsidy? You can dump all other costs into that subsidy," said Fernandes, questioning whether the national carrier is using part of this subsidy to cover any lost revenue of its "Everyday Low Fares" campaign.

MAS launched its zero fare campaign for domestic destinations on May 5 2008 and extended its coverage to include Southeast Asia yesterday to boost sales and revenue.

On MAS selling free seats that would otherwise remain unsold and that they make up a small percentage of the total seats on offer, Fernandes said: "I am not taking risks over whether it hurts or not. I want to have my 'full ammunition' ... that I have all my routes and that MAS should not be given subsidies.

"I'm not against competition, but it has to be a level playing field. You can't send me into a boxing match with one hand tied behind my back.

"MAS has lucrative Singapore-Malaysia routes. It can take all that profit and use that profit to fight AirAsia (through its current free seats offer). We don't have access to those routes. It is not fair," he said.

"Overall, I think it is bad for Malaysia that two airlines are going after the same market.

"MAS should concentrate on the premium, full-service market (and AirAsia on the low-cost, no frills end of the market)," he added.