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.