KL - Singapore route to remain high cost only

Despite hints from AirAsia CEO, Tony Fernandez, that low cost airlines will be allowed to fly the KL-Sg route in early 2007, the latest comments from the govt seems to be quite negative.

More low-cost carriers may fly to Malaysia

KUALA LUMPUR: Malaysia may allow more Asian low-cost airlines, including Singapore’s Tiger Airways and Thailand’s Bangkok Air, to fly to the country to boost Visit Malaysia Year 2007.

Tourism Minister Datuk Seri Adnan Mansor said the government was in talks with Tiger Airways to fly to tourist destinations on the east coast of the peninsula and Sabah and Sarawak.

But Tiger Airways was unlikely to be allowed to fly the lucrative Kuala Lumpur - Singapore route, he said.

Read the rest of the story on NSTOnline.

Here's a short academic paper by academicians from University Malaya and NUS, summarising the economic & political dynamics of the KL-Sg route. It has some interesting comments on the "National Welfare" argument that Malaysia routinely uses to reject any liberalisation to the 1980 Air Services Agreement that governs the KL-Sg route.

Take the cover of KL-S'pore route (pdf file)

At the end of the day - just like with Proton - the govt is trying to protect MAS by limiting competition and therefore the alternatives available, so as to drive up prices (and therefore profits). All at the cost to the customer ie. you and me, especially me.

And the dangers to MAS (ie. lower profits per passenger and more competition to put bums in seats from the budget airlines) are not just limited to the KL-Sg route alone. A more frequent, faster and cheaper shuttle service will also draw passengers (flying to destinations other than Singapore), away from KLIA in favour of Changi.

This is because flights to many destinations, are cheaper flying out of Changi than out of KLIA. There are simply more airlines flying out of Changi, meaning more competition and lower prices naturally.

What's stopping outbound KL passengers from flying out of Singapore now - is the high cost of getting from Malaysia to Singapore (thanks to the RM700 / S$300 ticket prices for the shuttle service). They need to add that RM700 or S$300 on top of whatever fare they pay to fly from Singapore to their final destination. As a result, the total cost of flying from KL-London (for eg.) is still roughly competitive with the total cost of flying KL-Sg-London, simply because of the artificial added cost of the KL-Sg shuttle.

Any reduction in the KL-Sg shuttle fares will erode the artificial competitiveness of flights of out KL vs those out of Sg - meaning more headaches for MAS and Malaysia Airports Bhd.

So, what is the solution? Continued protection for an inefficient airline and badly run airport at the expense of the Malaysian consumer?

I say if we don't need a bad national car, we certainly don't need a lousy national airline.