Monopoly No More, AirAsia to fly to Singapore

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Oct 25 2007
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Tony Fernandes’s grumbling about the bias protectionism rule in favor of Malaysia Airline System (KLSE: MAS, stock-code 3786) appears to bring positive result after all. Today Malaysian Prime Minister Abdullah Ahmad Badawi said that budget carrier AirAsia Berhad (KLSE: AIRASIA, stock-code 5099) has won a battle to fly the lucrative Singapore-Kuala Lumpur route, breaking the national carriers’ monopoly.

Reports said the cabinet agreed yesterday to open the routes to budget airlines from the two countries under a reciprocal arrangement, starting in December 2007 or January 2008. The Cabinet has given approval for AirAsia to operate two daily flights each from Kuala Lumpur, Penang, Kota Kinabalu and Kuching to Singapore.
AirAsia TigerAirways new routesEarlier this week AirAsia’s founder Tony Fernandes said (with great sadness) that with Singapore indicating it wants to open the sector to competition ahead of a January 2009 deadline, Malaysia Airlines remained the only roadblock. Tony who is reportedly to be in Singapore could not comment as he claimed he isn’t aware of the government’s decision.
MAS, the government-linked company that has been pampered since its birth and never knows the word competitiveness and survival through-meritocracy had opposed the move, saying it needs more time to execute its recovery and that Malaysia and Singapore should adhere to the original timeline for liberalization – a reference to the Asean Open Sky Policy, scheduled to take off on Jan 1, 2009.
AirAsiaWith this new development, it appears the rumor about AirAsia’s possibility of getting the direct flight to Singapore in exchange for the goodies given to MAS’s own version of low-cost entity FireFly is true. FireFly which was allowed to operate from Subang and even fly the same routes as AirAsia (talk about copycat) in the latest local aviation news is said to emulate the business model of AirAsia.
Tony who is in Singapore currently might be there to finalize the details of the new route including logistic and fares. Already there’s news that prices for the Singapore flights are expected to start at RM9.90 for return trips. This will deal a severe blow to MAS which is currently serving the exclusive and lucrative Kuala Lumpur-Singapore route which together with Singapore Airlines fly 20 times a day between the two cities.

But what prompted Malaysian Government to become business-conscious all of a sudden? It can’t be the articles written by FinanceTwitter. Definitely it couldn’t be the continuos grumbling from Tony Fernandes. It could be a combination of several factors. On top of the table, it could be the “request” from Singapore Airlines itself to allow its Tiger Airways to fly direct to Kuala Lumpur. Tiger Airways’ profit is Singapore Airlines’s profit since the latter owns 49 percent stake in Tiger Airways.

Visit Malaysia Year 2007It could also due to the fact that the tourists’ arrival during the current 2007 Visit Malaysia Year is bad, so bad that the Tourism Ministry is talking about extending the program into 2008 (of course the ministry could twist the fact that the extension is due to the overwhelming response so much so that it would be cruel not to prolong the program). Tourism is one of the industries that bring in good, easy and hot money into the country.
Whatever the reason, AirAsia is seeing the early arrival of Santa Clause as the profit from the new routes will definitely contributes to the company’s bottomline. The stock should rejoice with such a piece of news.
# Note: It’s been extreamely difficult to post articles, check Google’s gmail and moderate comments for the past 2 days. The performance is so bad (yes, the problem still persists till now) that I thought I’m connected to internet via 28.8kbps dial-up. It appears accessing Google’s products are taking ages – that’s the risk of putting all the eggs inside the same basket. Wonder what could be the problem(s). Heck if not for the reason that Google stock has made good money for me, I would start cursing it.
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