Media statement by Liew Chin Tong in George Town, Penang on Friday, 12^th August 2011:

Air Asia - MAS tie-up: GLCs creating an airline cartel

The MAS-Air Asia Comprehensive Collaboration Framework announced on 9 August is terrible news for Malaysian consumers and air travellers.

GLCs Khazanah and CIMB are creating an airline cartel that will result in higher air fares and less frequent flights.

As reported in The Edge Financial Daily on Thursday, 11 Aug:

• MAS will focus on becoming a premium airline

• MAS' turbo-prop unit Firefly will be transformed into a full-service carrier

• Air Asia will remain focused as a regional low-cost carrier.

When competitors such as MAS and Air Asia choose to collaborate in this way, consumers suffer:

• "The distinct differentiation among the airlines will reduce the current competition and... rationalization or routes and frequencies", said Affin Bank;

  In plain language - rationalization means fewer flights which means less choice and convenience for ordinary Malaysians

• Maybank said "... there is surplus capacity on certain routes - business overlap will be reduced to nothing"

  Reducing business overlaps means reducing choice for consumers

• An unnamed analyst said "with Firefly removed, Air Asia will .. have a lot to gain".

  Will Air Asia's gain be in the form of higher prices?

As independent, not-for-profit research institute REFSA (Research for Social Advancement) said on 12 Aug:

1. Low-cost community carrier Firefly is already pigeon-holed and pushed up the cost curve away from Air Asia. From being able to freely compete in whatever way it deemed fit, it is now slated to be a "full-service regional airline";

2. Flight frequencies will likely be reduced. For example:

   • Let's say Air Asia and MAS both have Kuala Lumpur - Kuching flights; one at 11.00am and the other at 12 noon;

   • Each airline on average fills 65% of the plane;

   • When Air Asia and Malaysia Airlines were competing, both would run flights to fight for market share;

   • Now that they are collaborating, it makes good business sense to just run one flight which will be over-booked all the time;

   • All good business sense, but bad for the consumer who now has less choice;

3. Air fares will also likely go up. Where previously both airlines would compete to offer the lowest possible fare, they can now collaborate to raise prices. And they can also help push up prices by reducing frequencies, as mentioned in point 2 above;

4. Airline employees will now have fewer job options, and likely smaller pay hikes. Air Asia, MAS and Firefly competing for talent must have surely been good for employees. Collaboration between them would mean fewer options for employees."

The collaboration between MAS and Air Asia will result in cartel-like policies that result in more expensive air tickets, less frequent flights and poorer service for ordinary Malaysians.

Effectively, the rakyat are being called upon to subsidise and save MAS, and perhaps enhance Air Asia's profits in the process.

This rakyat-unfriendly arrangement is being lead by GLCs Khazanah and CIMB. I call upon the government to call of this deal. MAS must not be saved at the expense of ordinary Malaysians.

* Liew Chin Tong, DAP International Secretary & MP for Bukit Bendera