Wednesday, November 15, 2006

Singapore budget carriers circling around result of Changi-KL route

Singapore said it's waiting for Malaysia's decision on whether to allow discount airlines to fly the route between the island state and its neighbor's capital city, Transport Minister Raymond Lim said.

Lim, who is also the second minister for foreign affairs, said Singapore hasn't heard from Malaysia, which has completed a study to allow budget carriers to fly the route. “We await their proposal,” Lim said. “We have been ready to expand air services agreement for quite some time now and it's timely to do so. It's a great pity that we have not revised this particular agreement for the past 20 years.”

Singapore Airlines Ltd. (SIA) and Malaysian Airline System Bhd. (MAS), which currently dominate the flights between the city-state and the Malaysian capital of Kuala Lumpur, in September 1988 agreed to divide their combine revenue on the route.

“The route, a cash-cow for Malaysia Airlines and Singapore Airlines, is in the sights of Tiger Airways, AirAsia and Jetstar Asia, which all promise to offer significantly lower fares,” Peter Harbison, executive chairman of the Centre for Asia Pacific Aviation said in a Sept. 6 bulletin.

Although it may mean a dip in revenue for state carriers SIA and MAS, greater access between the two countries will boost tourism, benefit their economies and fuel traffic at their airports. The move may also hasten a 2008 air services agreement, where the 10-member grouping of the Association of Southeast Asian Nations, or Asean, must allow carriers freer access in the region.

MAS is strongly opposed to opening up this route.

So will it happen? Liberalisation is important but would Malaysia protect MAS? Would we see SIA and MAS step back for Tiger and Airasia to take centrestage?

Let us know what you think.