Wednesday, December 07, 2005

KUL-SIN - Why Are We (Still) Subsidising The Two Airlines???

Malaysia announced yesterday that it will not allow more Kuala Lumpur-Singapore shuttle flights ahead of the Asean "open skies" policy which will come into effect in 2008. As reported in The New Straits Times (6/12/05). Malaysia is not in favour because the benefits accruing to MAS from liberalising the route will be limited, according to the authorities.

"SIA and possibly SilkAir will be able to fly to Kuala Lumpur and several other destinations in Malaysia when all present restrictions on passenger flights between Asean capital cities are lifted by 2008.

"But for MAS, Singapore will remain just one destination. The benefits derived from liberalisation will not be the same.

"Under the circumstances, Malaysia has no choice but to stick to the present schedule of the KL-Singapore shuttle flight," said a transport ministry official here.

MAS operates 14 flights a day, and SIA, which operates 12 flights, will sustain the virtual joint monopoly to account for 182 of the 213 weekly flights. That's 85% of the market share for the KL-Singapore route. We don't really care about the open skies thing. This monopoly has been going on for way too long. Even toll bridges have an expiry date for collecting tolls. Nowadays, fares for flying to Bangkok, Bali, Phuket are even cheaper than flying between the two countries. Where is the justification?? Already Malaysia and Singapore are among the two places on earth that prices cars most expensively (I'm sure we are in top 10 if not the top 5 countries).

Both airlines operate a total of 26 flights a day. The pricing is dampening real demand. If we were to liberalise the market, we could see return fares plummeting to RM250 at least - the drop would be more than compensated by the jump in traffic. At RM250 return, I think the daily traffic should easily triple on conservative estimates (just have a look at the number of buses traveling to-and-fro between the two countries on a daily basis).

If the Transport Ministry say that there is no real benefits accruing to MAS, what about the benefits for Malaysians in general? You can still keep the monopoly, but just agree to price it cheaper, say RM350 return - its more than a fair price as the load factors for the KUL-SIN almost surpass 90% for every flight anyway!!! Certainly we cannot save the red ink for MAS just from the subsidy of this KUL-SIN sector!!??

Ipoh to the rescue. As reported in The Star today (7/12/05), the under-used Sultan Azlan Shah Airport here is set to be a low-cost carrier hub with AirAsia introducing flights from Senai to here in February. Datuk Tony Fernandez said the airline would begin operations on Feb 1, with 4 Senai-Ipoh flights a week. “We will increase to a daily flight frequency when we take delivery of our A320 Airbus by the end of March,” he said, adding that the Boeing 737 aircraft would initially be used for the sector. Fernandez said flights to the airport would boost economic development in the city and its surrounding areas. “We also believe that with the help of the minister and the mentri besar, the airport can be developed into a northern low-cost hub complementing the KL International Airport,” he said, adding that the flights would attract more tourists to the city. To a question, Fernandez said AirAsia may fly to Indonesia, Thailand, Sabah and Sarawak from Ipoh.

“We are considering a state proposal to turn the airport into a low-cost hub,” said Chan, who is also MCA deputy president. On calls to increase facilities at the airport, Chan said it would depend on the routes AirAsia wanted to create. Tajol Rosli said AirAsia would “breathe some life” back into the airport.

Concluding Comments - I think this is a brilliant idea. Ipoh's airport has been way under-utilised due to the popularity of the Nort-South Expressway. By making it the low cost carrier hub, it will generate enormous traffic. As it is, it takes a KL person about 1 hour - 1.5 hours to get to KLIA, a bit faster if they take the KLIA Express train. It takes 2 hours to get to Ipoh. Let's be smart here and make parking at Ipoh airport free, that way travellers can leave their cars in Ipoh and travel to wherever they want without incurring high parking charges. Ipoh is an ideal catchment area for people from Penang and even KL.

The move should be a highly successful one for all concerned (except MAS) and would also prove a trigger to accelerate the opening up of routes for all carriers. Hey, KL-Sin is still at RM650 return, I think RM200 return Ipoh-Senai would be highly attractive, plus I can get a taste of the the good food in Ipoh before embarking on my flight... that's Malaysia... Truly Asia!

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