MAS-AirAsia price war debate unlikely
All-Malaysian aviation battle heats up: A combination photo shows an AirAsia jet and a Malaysia Airlines' (MAS) A380. AirAsia has criticised MAS for undermining its ability to survive a challenging aviation market.Pictures: EPA
Saturday, May 17, 2008
THE likelihood of a public debate between Malaysia Airlines managing director/chief executive officer Datuk Seri Idris Jala and AirAsia chief executive Datuk Tony Fernandes on the aviation industry is now very remote.
"I do not have the time nor the interest, to indulge in such futile exercises when there are other priorities that I need to attend to," said Idris in a statement released by Malaysia Airlines.
"I am just a simple guy who just wants to do everything he can under the extremely tough operating environment, and to ensure that Malaysia Airlines continues to deliver the highest quality products and services at affordable prices," he said.
Idris noted that AirAsia has also been giving away free seats for years without any protest by Malaysia Airlines.
Ironically, Tony Fernandes has claimed that his sales have increased by 20 per cent when MAS launched its Everyday Low Fares (ELF) and is still unhappy about it, he said.
The Malaysia Airlines head honcho also categorically denied the accusation by Tony Fernandes that MAS was using international subsidies to fund ELF.
In a long reply to Tony Fernandes' recent challenges and statement, Idris said the recent launch of Malaysia Airlines' Everyday Low Fares, was to help the national carrier to manage its inventory of seats much more efficiently and most importantly, ensure that it minimises its costs.
Malaysia Airlines acknowledged that the campaign has more than ruffled a few feathers in the airline industry, with accusations by its competitor that the national carrier is indulging in unfair competition and predatory pricing, but Idris said "nothing could be farther than the truth.
"We have an average seat-factor of 70 per cent, which means that our planes are taking off with 30 per cent of the seats unsold. With sky-rocketing fuel prices today, this means that every unsold seat adds on to our overall costs," he said.
He said Malaysia Airlines' move was simply to recover part of the sunk costs through the fuel surcharges.
He said unsold airline seats are like supermarket goods, which will go to waste closer to departure date of the flights.
All supermarkets slash prices before the expiry of the shelf life of these goods in order to minimise wastage and recover part of their costs, he said.
Yet, the supermarkets are still thriving and continue to be successful in attracting their own loyal customers to their outlets, he added.
As such, Idris questioned why the airline business should be any different in the manner the airlines dispose of their 'perishable' goods, which are the unsold seats, or why there is such a big fuss over its ELF program.
Ultimately, it is all about minimisation and recovery of costs which are escalating rapidly.
He said the incremental cost of an ELF seat is approximately RM25.00-RM35.00 ($10.59-$14.82). Since the average charge is RM90.00 per seat, the ELF campaign is totally self funded, he added.
Idris also pointed out that AirAsia has been given various forms of subsidies including initially zero and subsequently lower airport charges as well as funding of the budget airline's brand on the English Premier League referees, not to mention outstanding amounts owed by AirAsia/FAX to MAS and Penerbangan Malaysia.
"We clearly stated that we will take back full accountability for our P&L statement without subsidies but we also said that we must be given the freedom to operate our business as a commercial venture," he said.
Bernama
"I do not have the time nor the interest, to indulge in such futile exercises when there are other priorities that I need to attend to," said Idris in a statement released by Malaysia Airlines.
"I am just a simple guy who just wants to do everything he can under the extremely tough operating environment, and to ensure that Malaysia Airlines continues to deliver the highest quality products and services at affordable prices," he said.
Idris noted that AirAsia has also been giving away free seats for years without any protest by Malaysia Airlines.
Ironically, Tony Fernandes has claimed that his sales have increased by 20 per cent when MAS launched its Everyday Low Fares (ELF) and is still unhappy about it, he said.
The Malaysia Airlines head honcho also categorically denied the accusation by Tony Fernandes that MAS was using international subsidies to fund ELF.
In a long reply to Tony Fernandes' recent challenges and statement, Idris said the recent launch of Malaysia Airlines' Everyday Low Fares, was to help the national carrier to manage its inventory of seats much more efficiently and most importantly, ensure that it minimises its costs.
Malaysia Airlines acknowledged that the campaign has more than ruffled a few feathers in the airline industry, with accusations by its competitor that the national carrier is indulging in unfair competition and predatory pricing, but Idris said "nothing could be farther than the truth.
"We have an average seat-factor of 70 per cent, which means that our planes are taking off with 30 per cent of the seats unsold. With sky-rocketing fuel prices today, this means that every unsold seat adds on to our overall costs," he said.
He said Malaysia Airlines' move was simply to recover part of the sunk costs through the fuel surcharges.
He said unsold airline seats are like supermarket goods, which will go to waste closer to departure date of the flights.
All supermarkets slash prices before the expiry of the shelf life of these goods in order to minimise wastage and recover part of their costs, he said.
Yet, the supermarkets are still thriving and continue to be successful in attracting their own loyal customers to their outlets, he added.
As such, Idris questioned why the airline business should be any different in the manner the airlines dispose of their 'perishable' goods, which are the unsold seats, or why there is such a big fuss over its ELF program.
Ultimately, it is all about minimisation and recovery of costs which are escalating rapidly.
He said the incremental cost of an ELF seat is approximately RM25.00-RM35.00 ($10.59-$14.82). Since the average charge is RM90.00 per seat, the ELF campaign is totally self funded, he added.
Idris also pointed out that AirAsia has been given various forms of subsidies including initially zero and subsequently lower airport charges as well as funding of the budget airline's brand on the English Premier League referees, not to mention outstanding amounts owed by AirAsia/FAX to MAS and Penerbangan Malaysia.
"We clearly stated that we will take back full accountability for our P&L statement without subsidies but we also said that we must be given the freedom to operate our business as a commercial venture," he said.
Bernama
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