Saturday, February 11, 2006

Coming To Terms With AIR ASIA
What's There Not To Like About AA

Singapore Not Really For Free Trade
For those who have been following Air Asia's dealings with Singapore to gain landing rights in Changi, knows what I am referring to. The Singapore authorities have been making Air Asia's life as difficult as it can be, mainly to safeguard the stupid monopoly of flights known better as KUL-SIN. Fernandes tried to step around the obstacle by ferrying passengers by buses from Johor to Singapore and vice-versa. Even that was blocked by Singapore’s Transport Ministry. So, Singapore should not always say they favour free trade and has no protectionist policies. Malaysia do have protectionist trade policies. Singapore should just come out and say they do want to protect certain sectors of their economy, while at the same time wanting to be a world class air travel destination and airport operator.

MAS & Air Asia
Now the LCC Terminal is scheduled for full operations on March 23, three days ahead of Singapore’s Budget Terminal. The terminal was renamed from low cost airport terminal (LCAT) earlier. This Subang site will prove to be a critical development in launching Air Asia to the next level. The LCC Terminal will be the first in Asia and will cater up to 10 million passengers. Fernandes expects AirAsia to handle four to five million passengers next year. This will weaken MAS' hand even further. MAS is in a no-win situation. MAS should just give up trying to come up with their own budget airlines.

There is one good solution, just have to check their egos at the door. MAS to buy 20% of Air Asia - full stop!
1) This will remove the need for MAS to start another budget airline. Save on capital and eating into each other's margins
2) A more effective redistribution of local routes of MAS to Air Asia, a win-win situation instead of a "I want this - you take that" schoolyard bullying exercise. This will have the effect of lessening the losses suffered on certain local routes operated by MAS, and reduce duplication of services
3) MAS will be able to help Air Asia in certain areas such as linking up of flights to other international destinations, and Air Asia could teach MAS a thing or two about cost control, flight routing capability, internet transactions and interfacing with clients, and the list goes on
4) The deal will cause both MAS and Air Asia share prices to go onto a higher platform as there are unbelievable synergistic benefits and cost savings

But the egos, man, oh man, the egos... MAS has to come to terms and accept that Air Asia does a lot of things better than them. By acquiring the stake, MAS should NOT even think of getting a controlling stake (that's why 20% or 25% is proposed) - check your egos. Will that happen? I don't know. If I was the Finance Minister or head of MAS/Khazanah, that's what I will do... or even force them to do. I do think Air Asia and Tony would be very welcoming to a deal like that, save them a lot of headaches - and losing something but gaining something even more will get Air Asia easily behind the deal.

1 comment:

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