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Airline chiefs in M'sia speak out on price war

Publication Date : 20-02-2014

 

In the wake of the price war in the aviation sector, Malaysia Airlines group chief executive officer Ahmad Jauhari denied that the national carrier dumped prices while the group chief executive officer of AirAsia Bhd Tony Fernandes called on Putrajaya to have a re-look at the industry practices.

Ahmad Jauhari said the national carrier did not dump fares but was forced to drop prices to respond to market fares.

“We have to respond to market fares or we cannot sell our tickets,” he said in a briefing on Wednesday.

The aviation industry is seeing intense competition causing airlines to drop fares to fill up seats in their planes, which has resulted in airlines getting lower yields on each ticket sold and causing pressure on margins.

MAS recorded a loss of 1.2 billion ringgit (US$363 million) for the financial year ended Dec 31, 2013, although it managed to register a bigger capacity and reduce its operating cost.

MAS is not alone as other airlines are also feeling the heat from reduced yields.

“The whole aviation industry need a re-look,” Fernandes was quoted by an online portal reporting on the 1.2 billion ringgit losses chalked up by MAS for 2013.

Fernandes also said that MAS had cut cost and yet it still incurred a loss of 1.2 billion ringgit, which the national carrier could afford because it was supported by the government.

“My point is that if you’re running a private company, could you afford to cut 16% of your costs and still lose 1 billion ringgit ($302 million)?” he was reported to have said.

Apart from MAS and Air Asia, the other domestic airlines are Malindo Air, FireFly and AirAsia X, which is a long-haul, low cost carrier. All the airline operators are adding on capacity causing prices of tickets to come down.

Ahmad Jauhari said that to be relevant, MAS had to have a decent share of seats in the market.

“We are not the No. 1 carrier in KLIA (Kuala Lumpur International Airport) on the share of seats. We now only command 28% of the share of seats in KLIA.”

In 2005, MAS commanded 58% of the share of seats in KLIA.

 

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