It took everyone by surprise when a share swap deal was announced between Khazanah Nasional Bhd and Tune Air Sdn Bhd. Under this deal, Tune Air, holding company of AirAsia, will own 20.2% shares of MAS, whereas Kazanah will have a 10% stake in AirAsia. Before the share swap (presently), Khazanah owns 69% of MAS, which will be diluted to 49%, post-share swap. The deal came about when Tan Sri Azman Mokhtar and AirAsia's group CEO Tan Sri Tony Fernandes had a long chat on a flight to the US a few months ago.
When AirAsia commenced operation at the end of 1996, it had introduced such low fares that had never been seen before in this part of the world. Everyone was excited, especially for Sabahans, and I am sure so were the Sarawakians, because air travelling was now more affordable to many more people. As we all know, AirAsia's slogan is "Now Everyone Can Fly”. Indeed before the debut of AirAsia, in the late 90's air fare prices between K.L. and K.K. had reached around RM800.00 for a return ticket on MAS. AirAsia, however, sold their seats for about RM400.00, with special low prices of less than RM100 if you had book early.
This greatly benefited the domestic travelers like us in Sabah, as it also forced MAS to lower their prices for the domestic sector in order to compete with AirAsia. Initially, everyone said AirAsia would not survive long with such low prices, but before we knew it , the company was expanding and buying new planes. This showed that the domestic flights were not a loss making sector which was inferred for many years. In fact, Air Asia saw much potential in Kota Kinabalu that the airline had turned KK into a secondary hub.
AirAsia brought much benefit not only by providing cheaper air fare to the locals, but also brought in tourists from other countries. We saw the tourism sector flourishing, particularly at the lower end back packer group. Lodging houses sprouted all over town, with many shophouses on Gaya Street being turned into budget hotels. In fact, the town, Gaya and Beach Street in particular, have been revived.
It is rather surprising that MAS had not been able to do likewise, as it is afterall a government linked company (GLC) with all its advantages. GLC's are suppose to help the people by providing services and improving the lives of its citizens. However, the national carrier for 1st Qtr FY2011 has posted a net loss RM243.3 million, and analysts expect this to continue into 2nd Qtr, with losses of more than RM400 million.
Tan Sri Fernandes has admitted that one of the contributing factors for Tune Air agreeing to this deal is Firefly. Firely a low cost airline of MAS covering the domestic sector, was stealing its market share. Out of every three Firefly passengers, two were from AirAsia and one from MAS. 60% of AirAsia's revenue comes from the domestic market, so Firefly was a threat.
So does removing this threat by collaborating with MAS mean higher air fares for us domestic travelers? Are we Sabahans, and most likely Sarawkians as well, going to be on the losing end again? Competition is always healthy as market forces will determine prices. With this deal, competition is eliminated. Many Sabahans travel to K.L. for business since it is the capital of the country. Businesses factor in their traveling expenses when calculating their cost, and this is passed onto consumers or clients. Many goods are also transported by air, and so higher air fares will drive up the cost of living for us in Sabah. This collaboration is supposed to help MAS, but many doubt it will, if its culture does not change.
This share swap deal looks every bit a monopoly in the making for air traveling in the country, and the rakyat will most likely end up as the losers.
Carrie Fong is Sabah Progressive Party (SAPP) Supreme Councillor and Exco Wanita Secretary
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