Saturday, November 12, 2011

ANOTHER LAYER OF COMPETITION

A possible new super-premium full-service carrier (FSC) by AirAsia chief Tan Sri Tony Fernandes coming into operation would add another layer of competition to the domestic airline industry, which may in turn cause the market to become more fragmented, say analysts.

As it stands, the share-swap deal signed last August saw national carrier Malaysia Airlines (MAS) and its unit Fiaffiliate refly focusing on premium travel while low-cost carrier AirAsia and its long-haul AirAsia X compete in the low-cost sector.

"A new super-premium FSC would only add a new layer of competition, which may lead to too much fragmentation and I am not sure how that is going to go well in Malaysia," said UOB Kay Hian Research regional aviation analyst K. Ajith from Singapore today.

He said while Malaysia seemed keen to develop Kuala Lumpur into a premium hub for air travel, it should be the goal of the national carrier to do that, "especially so when the whole idea of the recent MAS-AirAsia collaborative framework was for MAS to rationalise its routes and focus on the premium segment. Thus, it does not make sense for Fernandes to start a new super-premium airline. And even though the proposed airline will operate out of Subang, it nonetheless will add competition to the market," Ajith added.

SunBiz reported yesterday that Fernandes, who already has interest in four airlines, is set to expand his empire further locally as he moves to start a new super-premium FSC that is likely to be called Caterham Jet, next year. The new airline has yet to be granted an air operator's certificate (AOC) by the government, but is understood to have already secured several Bombardier CRJs.

Ajith doesn't see the new airline having a problem obtaining an AOC, but "the question now is whether there will be room for one more airline in Malaysia? It is also perplexing how everybody (MAS, Firefly, AirAsia, AirAsia X and the proposed Caterham Jet) can be part of a happy family, with Fernandes' various stakes in them," he added.

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