Friday, August 04, 2006

Enough Already, Stop Bilking The People, Liberalise the KUL-SIN Sector

Both budget carriers, AirAsia and Tiger Airways have been lobbying on their respective authorities to open up the lucrative Kuala Lumpur-Singapore air route, possible one of the top 5 busiest air route in the world. Tiget Airways pleaded to the Civil Aviation Authority of Singapore to once again express its desire to fly to KL. The sector means more to Tiger than AirAsia as Tiger needs the scetor more in order to stop from bleeding red ink, while AirAsia is already profitable without the route. The stupid thing is that even governments cannot automatically dismantle the monopoly, the presigned agreement prevents any changes being made unless they are approved by SIA and MAS. As both are government controlled, the government can easily exert influence to have the monopoly dissolved. The silly return airfare now stands at S$300/RM700.

Back in the middle of 2005, Malaysia said 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. 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.

This monopoly has been going on for way too long. Even toll bridges have an expiry date for collecting tolls. Nowadays, fares for flying from Singapore/KL to Bangkok, Bali, Phuket and sometimes HK 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 both in global top 5). 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 return fare 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 travelling to-and-fro between the two countries on a daily basis).

Singapore and Malaysia cannot keep operating this monopoly when there is an economic globalisation and free trade movement. 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 surpasss 90% for every flight anyway!!! Certainly we cannot save the red ink for MAS just from the subsidy of this KUL-SIN sector!!?? If you want MAS or SIA to grow up, liberalise the sector, if you cannot fight AirAsia or Tiger Airways on that sector, MAS and SIA should rethink their strategy and costing models, not harp on their governments to allow then to keep milking the people for the company's benefit.

Look at it this way, the people of Malaysia and Singapore are basically subsidising the profits for MAS and SIA, meaning we are basically paying disproportionately to profits and share price profits - isn't it galling when when foreigners holding SIA shares get a slice of our silly subsidy!!?? (I am leaving out comments on foreign shareholders of MAS for obvious reasons... ahem).

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