Strong headwinds swirl around AirAsia-Malaysia Airlines merger

Transport experts say a merger of AirAsia and Malaysia Airlines may kill competition and result in a surplus of aircraft. However, another expert feels the idea is workable.

The two airlines serve different market segments, according to Rosli Azad Khan, who has over 40 years in the transport industry.

“AirAsia appeals to the tourists market, students, pensioners, and migrant workers, among others,” he said, while MAS appeals to the corporate sector such as civil servants who travel on government warrants, business travelers, and high-end tourists.

He said healthy competition within different market segments in the airline industry would push fares down and increase service levels.

“It is not the role of the government to stifle competition and allow airlines to operate as a monopoly,” he added. “Monopolistic airlines would bring no economic benefit to passengers, airline staff, and the government,” he said.

Talk of a possible merger arose on Friday when senior minister Mohamed Azmin Ali told Reuters the proposal was one of the options to “save” the two airlines as the Covid-19 crisis batters the industry.

MAS has struggled to recover from two tragedies in 2014 – the mysterious disappearance of flight MH370 and the shooting down of flight MH17 over eastern Ukraine. The government has been seeking a strategic partner for the national airline.

Rosli said monopoly may reduce departure times, lower overall frequencies between given destinations, and reduce staff and workers, pushing more retrenchment of airline staff, causing the airlines to suffer more losses in aircraft number, passenger volume, and income.

Clash of two cultures

Harridon Suffian of the Malaysian Institute of Aviation Technology at Universiti Kuala Lumpur said the merger would create a surplus of aircraft and a problem of how to properly use these assets without creating wastage.

He said an in-depth study was needed.

The two airlines had overlapping routes, for example, Kuala Lumpur-Toyko. “This is redundancy and it has to be decided, in order to gain cost efficiency, on how to reduce this redundancy,” he added.

Harridon said there is also a clash of two different working cultures and philosophies. “One has to decide on how to approach this delicately as this involves employees of both sides,” he added.

Economics professor Nazari Ismail said a merger between Malaysia Airlines and AirAsia has to be “reasonable”.

However, he thinks there is no reason for the merger not to work, saying “they have been in the airline industry long enough to know how to proceed”.

AirAsia said last week that it had no incoming revenue and 96% of its fleet was grounded after most flights were suspended since March. Its long-haul arm, AirAsia X Bhd, had also parked most of its aircraft at its Kuala Lumpur hub.

The airline said last week it planned to resume domestic flights starting with Malaysia on April 29, Thailand, and the Philippines on May 1, India on May 4 and Indonesia on May 7. Some of those would be subject to governmental approval.

Malaysia has shut down most public activities from March 18 to April 28. www.freemalaysiatoday.com