MYCC to investigate if AirAsia-MAS share swap has made airfares go up

STAR, 4 January 2012

PETALING JAYA: The Malaysia Competition Commission (MYCC) wants AirAsia Bhd and Malaysia Airlines (MAS) to provide more information and documents regarding their share swap agreement to find out if it could potentially put air travellers at a disadvantage.

The MYCC, which began operations yesterday, would continue its probe if there was a breach of anti- competitive behaviour and abuse of dominant position in the deal which was signed in August.

It is also surprising that no one has lodged a complaint with the commission regarding the AirAsia/MAS share swap and collaborative deal even though it was widely criticised by many quarters.

The share swap and collaboration agreement forged between the two airlines had raised concerns that the absence of competition would result in more expensive airfares.

The MYCC is established under the Competition Commission Act 2010 to enforce the Competition Act 2010. Its main role is to protect the competitive process in the interest of businesses, consumers and the economy.

When contacted, MYCC chief executive officer Shila Dorai Raj said the commission had only received verbal complaints on the share swap issue. There are three ways for the MYCC to begin an investigation via a complaint lodged by someone with the commission, on its own accord or a directive from the Domestic Trade and Consumer Affairs Minister.

In the case of the share swap/collaboration agreement, Shila said the commission was acting on its own accord given the brouhaha surrounding the deal.

“We are going to request for information from both the airlines with regards to the share swap and collaboration, which were supposed to have been concluded in November. We need to know the exact contents of the agreement,” she said.

Without the documents, it would be impossible for the commission to make a conclusive study especially an economic analysis on the impact of such a collaboration on the consumers.

However, the commission “is not empowered to examine mergers and acquisitions.” Shila explained that it did not prevent the commission from checking on the collaborative activities arising after the merger and whether the activities were anti-competitive.

The commission is likely to give both airlines until the end of the month to revert with the information and documents that it needs to investigate the matter.

The commission also has the powers to extract information from both the airlines if they failed to oblige with the required documents.

The impact of anti-competition is higher airfares for the consumers. Some travellers in Sabah and Sarawak had alleged that the element of competition had been removed with the suspension of Firefly jet operations soon after the share swap deal was announced.

Under the share-swap deal AirAsia's major shareholder Tune Air Sdn Bhd now holds a 20.5% stake in MAS, while MAS' major shareholder Khazanah Nasional Bhd holds a 10% stake in AirAsia.

Under the collaborative agreement both parties would cooperate in the areas of ground handling, training and engineering among others. “The jet operations have infused competition in the KL-Kota Kinabalu (KK) and KL-Kuching sectors and fares were competitive but now the fares are not as competitive,” said an air traveller who commuted between KK and KL.

Whether the MYCC would find anything conclusive or if it has the clout to take both the airlines to task remained to be seen but AirAsia's sister airline, AirAsia X (AAX) surprised many travellers when it offered flat pricing for its KL-Dehli and KL-Mumbai routes.

“There is no longer the pull factor. Its pricing is now closer to what full service carriers offer, so where is the promise that low cost fares are 30% to 40% lower than full service carriers?” another traveller asked.

A check on the airline's web-site reveals that its KL to Mumbai airfare is RM694 (fares only) and for KL-Dehli, it is RM894 (fares only) unlike other destinations where there are several classes of high and low fares. The fares are applicable from Feb 15 to Oct 15 and the same rate is offered on the return journey.

“Whether it ties up with what the market is speculating (that the airline would suspend flights to India and Europe) is unclear, but for a low cost airline to charge like a full service carrier seems very strange,” the traveller added.

AAX CEO Azran Osman Rani, when contacted, said: “It is a commercial decision to have such fares. They are our non-promotional fares but we are working on a sale.” He declined to elaborate on the sale.

He added that the fares were structured in that manner because the cost to fly into Indian airports was higher than to Australia and the demand for flights to northern India was lower compared with southern India. “In reality, the airfares do not commensurate with cost,” he said.

Asked when AAX would begin plying the KL-Sydney route as there were talks that it would begin mounting flights to the capital city in April ahead of its rival, Scoot, Azran said: “Right now we have not received all the approvals, but we remain interested in Sydney.” Scoot is planning flights from Singapore to Sydney in the middle of this year.

SPAD: Meet state government to settle woes

STAR, 9 January 2012

PUTRAJAYA: The Land Public Transport Commission (SPAD) has urged the Malacca Omnibus Operators Association to meet the state government to resolve its financial woes.

SPAD chairman Tan Sri Syed Hamid Albar said the problem could be settled if the group discussed the matter so that an agreement could be reached.

He said there was a need to review the public transport system in the state.

“We need to examine the whole system, including the ticketing system, routes and fares, among others, to improve the current situation. Bus operators should also be financially ready to compete with one another,” he told The Star.

The Government, he said, had come up with short-term measures to help keep bus services, particularly on unprofitable routes in rural areas, afloat.

On Dec 19, the Government pledged a RM400mil fund to support troubled stage bus companies. SPAD began receiving applications on Jan 3.

Stage bus operators in Malacca had threatened to halt their services from Feb 1 in protest over the state government's failure to solve the concessionaires' woes.

Malacca Omnibus Operators Association president Razali Endun said 10 of the concessionaires decided to halt their buses after no financial lifeline was rendered as pledged by the state government.

“The impending strike was aimed at forcing the state government to pay compensation to the ailing bus operators as promised in July.

“We have waited for the monetary assistance until Dec 31 but there was no response from the state government,” he said.

Last November, the Malacca Government agreed to buy all 10 stage bus companies servicing about 130 routes in order to alleviate the financial burden faced by the local concessionaire.

Razali said the bus operators suffered huge financial losses as much of their earnings were allocated for maintenance of their aging fleet, besides salary payments to about 1,500 staff.

“Our woes are further compounded by the existence of state government-funded bus service Panaroma which services lucrative routes.

“We are forced to ply the social route that is not covered by Panaroma, which is unfair to us,” he added.

SPAN and NGO at odds over RM1.7bil NRW findings

STAR, 9 January 2012

PETALING JAYA: The National Water Services Commission (SPAN) and an NGO continue to lock horns over the issue of reducing Non-Revenue Water (NRW).

NRW is water that has been treated and is “lost” either through leaks, thefts or metering inaccuracies before reaching the customers.

Association of Water and Energy Research Malaysia (Awer), recently revealed that the country's water industry lost RM1.7bil to NRW in 2010.

Awer president S. Piarapakaran said that as a technical regulator, SPAN must set the procedures and guidelines to ensure that water quality was not compromised.

“To realise this, SPAN must prepare the National NRW Reduction Action Plan and not let water operators tell SPAN what to do,” he said in a statement yesterday.

He was referring to SPAN's statement that the loss was due to insufficient funding to replace aging pipe networks as well as poor construction and maintenance.

Piarapakaran said SPAN was formed to improve the operational efficiency of the industry and in particular the reduction of NRW through short, medium and long-term programmes as outlined in the SPAN Act 2006.

Meanwhile, a SPAN spokesman said the RM1.7bil figure is highly erroneous.

“It is not only misleading, it can also cause unnecessary alarm,” he said.

2014 water crisis warning

STAR, 14 January 2012

PETALING JAYA: Selangor may experience a water crisis before 2014 if the state government keeps delaying construction of the Langat 2 water treatment plant, warned the Association of Water and Energy Research Malaysia (Awer).

Its president S. Piarapakaran said a study it conducted concluded that 2014 would be a “suitable candidate” for a water crisis to occur in Selangor if the demand for water increased between 2% and 2.5%.

“If the annual demand increase is higher (than that), the crisis might hit the Klang Valley earlier,” he said in a statement yesterday.

He said the average increase of treated water production annually from 2007 to 2010 was 2.14%.

According to the Malaysia Water Industry Guide 2011, Selangor (including Kuala Lumpur and Putrajaya), produced 3,889mld, 3,926 and 4,063 million litres of water per day in 2008, 2009 and 2010 respectively.

To prevent such a crisis, Piarapakaran urged the state and Federal governments to set aside their differences and work together to prevent such a crisis, including ensuring water concessionaires were regulated and fully-licensed under the Water Services Industry Act (WSIA) 2006.

Pointing out that the water services industry restructuring process had been “hibernating” since 2008, he stressed that the Pahang-Selangor Raw Water Transfer project and Langat 2 water treatment plant must go forward.

“Delay in building the Langat 2 treatment plant will escalate the cost, which will be passed on through the tariff eventually,” he said, adding that water should not be politicised.

Piarapakaran said the Langat 2 treatment plant was much more cost-effective and reliable compared with the Selangor government's suggestion of constructing more groundwater extraction plants.

“Groundwater extractions also come with many other environmental impacts such as hydraulic cracks and instability of ecosystem,” he said, adding that it might not successfully work during a water crisis either.

Privatise waste management, states advised

STAR, 14 January 2012

KUALA LUMPUR: Selangor and Penang have been urged to privatise their solid waste management, as had been done by the other states and the Federal Territories in peninsular Malaysia under the Solid Waste and Public Cleansing Act.

Perak had also recently agreed to privatise its solid waste management and be regulated by the Act by the end of the year.

Housing and Local Government Minister Datuk Seri Chor Chee Heung urged Selangor and Penang to do so as soon as possible to ensure good public health.

The Act provides for, among others, the separation of wastes, storage, collection, transportation, processing, recycling and disposal.

The Federal Territories of Kuala Lumpur and Putrajaya as well as Pahang, Kelantan and Terengganu are supervised by Alam Flora Sdn Bhd; Kedah and Perlis by Environment Idaman Sdn Bhd and Johor, Malacca and Negri Sembilan by SWM Environment Sdn Bhd.

“The privatisation of solid waste management will not incur any additional charge for consumers as the Federal Government will bear all the extra costs,” Chor said after presenting mobile bins to residents in Taman Desa here yesterday.

Three million units of mobile bins will be distributed in stages to residents and business owners in all local councils to improve solid waste management efficiency.

Chor said the first phase from Sept 1 involved the distribution of bins to residents under the jurisdiction of Kuala Lumpur City Hall and the various city councils.

“The second phase under the municipal councils will be done by Sept 1 next year and for district councils, from Sept 1, 2014,” he said, adding that all bins came with a cover and were able to prevent leaking from leachate.

Chor said owners of landed properties would get a 120-litre bin each while those who lived in high-rise buildings would be given either a 60-litre or 110-litre bin each and commercial property owners would receive a 240-litre bin each.