Tuesday, July 24, 2007

Open skies and the MAS-AirAsia discord

Excerpts from an interview with AirAsia 's Tony Fernandes

STARBIZ: Why does AirAsia need the two daily flights into Singapore?

Datuk Tony Fernandes: If Malaysia wants to become a low-cost carrier (LCC) hub, it needs to be connected to at least all the major cities in Asean. Right now, AirAsia is in three of the four major cities – Kuala Lumpur, Jakarta and Bangkok – and only Singapore is left.

With passengers coming to KL, they have an option of flying within Malaysia and Asean. If we do not offer the Singapore connection at cheaper rates than the current RM800 for a round trip, these passengers would just bypass us and use Tiger Airways instead. Not opening the route, to us, is a missed opportunity for AirAsia.

Next year, the Singapore Grand Prix will begin and we can potentially do a lot of advertising to get the hundreds and thousands of people who descend at the races to see parts of Malaysia if they can find a cheaper way to fly into KL.

They can fly to Langkawi, Penang, Kota Kinabalu and Kuching if they come into Malaysia.

Datuk Tony Fernandes

In your view, why is MAS objecting to a possible early timeline?

Did anyone wait for AirAsia to be of a certain size? From the start, we were up against an airline that had subsidies, enough aircraft and support from the Government.

Just look at us. Five years ago we had just two planes and today, we carry 18 million passengers. We did not have 62 labs or 20 management consultants telling us what to do or 17 code names. It was survival for us and now look at our growth. No one protected us and today, MAS has a bigger market capitalisation than ours and its profits are double that of ours. So why is one national champion trying to hold back the growth of the other? What encouragement is there for other entrepreneurs in this marketplace if our growth is held back?

Look at the CIMB group. It is now a regional bank but not once did Datuk Nazir Razak talk about protection in Malaysia even when CIMB had to compete with banks like Maybank or even Public Bank.

So Idris (MAS managing director Datuk Idris Jala) needs to take a global view. It is a free market out there. Why stop others from growing? I am really surprised at what he said. He should not be scared for MAS. For one, he has better employees; we know that as we have hired some of them!

He talked about Firefly (MAS’ budget carrier based in Penang). He said that Firefly could not fly to where AirAsia was flying. I have no issue with that if Firefly wants to fly anywhere but we should also be flying wherever it flies. We are even thinking of flying the Penang-Kota Baru route and we could even fly to Koh Samui when the runway is made bigger. If MAS wants to fly from Penang to JB on a Fokker, we have no issue on that.

They even have Subang even though we fought so hard to stay back in Subang. Maybe Idris has opened something interesting for us, i.e. Subang. We can both operate from Subang.

We even support the idea of a bullet train linking both the cities and welcome Australia’s Jetstar to fly into Malaysia. Look at India. It has just decided on an open skies policy with Malaysia and that means a lot more competition.

We welcome competition even though we would be flying to Amritsar. We must not be afraid of competition. It is time to get rid of the chip on our shoulders. We are as good as Singapore and we can take them on. Just get that inferiority complex off.

How many Singaporeans currently fly AirAsia from Johor Baru?

About 30%-40% of our load factor from JB. From my recent trip, I found out that a lot of the youths in Singapore want to fly with us.

Would Singapore allow AirAsia to fly into Changi as previously that was not possible?

At one stage, they were a stumbling block but that has changed. Singapore also needs connectivity and it too has budget airlines, so their interest is protected.

What if AirAsia does not get the two flights to Singapore this year?

It puts us back a year and it would be a blow to FAX. We ordered 15 Airbus and that means we have a lot of seats. We want to tap into the Singapore market for our long-haul flights to Amritsar, Hangzhou, Stansted and Australia. Come on, this is Visit Malaysia Year and what we need is connectivity. We should be talking about tourism in Malaysia.

The Government is planning to build a new LCC hub at KLIA to cater for over 30 million passengers and it would be one of the biggest LCC airports in the region. Imagine the LCC without a link to Singapore; would it be feasible? It is just like saying to the world there should be no link from Heathrow to Paris for the LCCs. Can you imagine the low-cost industry without Paris? That should tell you why Singapore should be in.

I have fought so hard all these years for us to be what we are. Our workers have been with us and they deserve credit, as without them, we would not have grown to this size. They deserve to get their bonuses and salary increases for they have managed to ride the tide in difficult times during the severe acute respiratory syndrome, tsunami, and having to compete with an airline that is subsidised.

AirAsia today is a Malaysian global brand and it has done an awesome job. We do not have unions but we still deliver the best. I think they should not be shortchanged anymore. We need Singapore to give our staff more and our passengers the link.

Our shareholders are also very important, the individual shareholders and institutional such as the Employees’ Provident Fund and Tabung Haji, for they believe in our growth story. We have letters from them asking when we can fly to Singapore and I cannot answer them.

Would the Government allow AirAsia to fly from Subang?

Maybe. We do not mind any form of competition, provided it is fair and it is better for Malaysia.

What are the key routes that AirAsia X needs to be successful?

London and Australia are important. We would fly to London via Stansted. In Australia, we are looking at Avalon or Newscastle. We would not want to go where MAS flies, but at some point in time, we would need to go where MAS is going.

Source : STAR
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