Malaysia's government is putting the finishing touches to a "formula" for domestic competition that it hopes will ease the rivalry between state-owned Malaysia Airlines (MAS) and growing private carrier AirAsia.
Transport minister Ling Liong Sik said after a Cabinet meeting late in February that the formula will provide guidelines for "healthy competition" between MAS and AirAsia. "We have worked out a formula on how these airlines can fly together but I will only let you know after I consult with prime minister Datuk Seri Dr Mahathir Mohamad," Ling told reporters.
Malaysia has been considering guidelines for domestic airline competition over the past year as a result of AirAsia's success. The former loss-making full-service airline was taken over by new owners late in 2001 and was relaunched as a low-fare carrier just over a year ago.
Since its relaunch AirAsia has expanded rapidly and helped grow the domestic market. It has complained, however, that government-owned MAS has been unfairly cutting fares.
The publicly traded entity of MAS has since late last year had no exposure to hefty losses from domestic operations, as they are now operated on behalf of the government for a fee. Soon after a restructuring deal was agreed with the government on these arrangements last year, MAS announced it was cutting some domestic fares by up to 50% in what was seen as a direct challenge to AirAsia.
After that controversial move Ling said that the government was urging the two airlines to co-operate and fly on different routes. However, it has not been made clear whether the new competition guidelines will formally call for this.
AirAsia now operates to 12 destinations from Kuala Lumpur, with three added since the beginning of the year.
Source: Airline Business
