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Sunday, September 16, 2012

AirAsia has strong barriers to react to Malindo

KUALA LUMPUR: AirAsia Bhd has formed several natural entry barriers in the low-cost aviation business since its inception 10 years ago, to keep many competitors out of the frills-free carrier’s ring, says CEO Aireen Omar.

She said AirAsia has one of the best cost structures for an airline in the Asian region, while possessing a strong brand and image as well as a sound safety record.

“This is something difficult for anybody to try to compete with us. However, this is something that we are ready, if there is any challenge to come,” she said, referring to the newly launched low-cost carrier, Malindo Airways.

She said even though Malindo Airways was formed through a joint venture between National Aerospace and Defence Industries Sdn Bhd (Nadi) and PT Lion Grup, it is still a fresh player in the low-cost aviation industry.

“We have seen many competitions since the inception of AirAsia as a low-cost airline. Malindo Airways is not an issue for us.

“As far as AirAsia is concerned, Malindo Airways is a value-based airline. It is in the middle of low-cost and premium class,” she said.

Malindo Airways is expected to begin operations on May 1 at the new low-cost carrier terminal, KLIA2 in Sepang, taking off with a fleet of 12 Boeing 737-900ER aircraft to destinations between big cities in Malaysia and Indonesia before expanding to other Asian countries.

The new airline is also considering offering low fares, even lower than AirAsia, in addition to the in-flight entertainment systems and in-flight connectivity in all of its aircraft.

Asked whether the new airline will create a price war, Aireen said she does not expect a very aggressive price war.

“At the end of the day, the companies must ask themselves whether their cost structure allows them to do so [price war],” she added.

On the sudden drop of AirAsia’s share price upon the announcement of the new low-cost airline, Malindo Airways, Aireen said: “We are not worried. It is just an over-reaction.”

AirAsia’s stocks, which closed at RM3.19 on Tuesday (the day of the announcement), shed 17 sen to RM3.02 on Wednesday and fell another seven sen to RM2.95 yesterday.

It rebounded today to close 15 sen higher at RM3.10
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