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The likelihood of a public debate between Malaysia Airlines managing director/chief executive officer Datuk Seri Idris Jala and AirAsia chief executive Datuk Tony Fernandes on the aviation industry is now very remote.
"I do not have the time nor the interest to indulge in such futile exercises when there are other priorities that I need to attend to," said Idris in a statement released by MAS. "I am just a simple guy who just wants to do everything he can under the extremely tough operating environment, and to ensure that Malaysia Airlines continues to deliver the highest quality products and services at affordable prices," he said. Idris noted that AirAsia has also been giving away free seats for years without any protest by MAS. Ironically, Fernandes has claimed that his sales have increased by 20 per cent when MAS launched its Everyday Low Fares (ELF) campaign and is still unhappy about it, he said. The MAS head honcho also categorically denied the accusation by Fernandes that MAS was using international subsidies to fund the ELF. In a long reply to Fernandes’ recent challenges and statement, Idris said the recent launch of the ELF was to help the national carrier to manage its inventory of seats much more efficiently and, most importantly, ensure that it minimises its costs. MAS acknowledged that the campaign has more than ruffled a few feathers in the airline industry, with accusations by its competitor that the national carrier is indulging in unfair competition and predatory pricing, but Idris said "nothing could be further than the truth". "We have an average seat factor of 70 per cent, which means that our planes are taking off with 30 per cent of the seats unsold. With sky-rocketing fuel prices today, this means that every unsold seat adds on to our overall costs," he said. He said Malaysia Airlines' move was simply to recover part of the sunk costs through the fuel surcharges. He said unsold airline seats are like supermarket goods, which will go to waste closer to departure date of the flights. All supermarkets slash prices before the expiry of the shelf life of these goods in order to minimise wastage and recover part of their costs, he said. Yet, the supermarkets are still thriving and continue to be successful in attracting their own loyal customers to their outlets, he added. As such, Idris questioned why the airline business should be any different in the manner the airlines dispose of their “perishable” goods, which are the unsold seats, or why there is such a big fuss over its ELF campaign. Ultimately, it is all about minimisation and recovery of costs which are escalating rapidly. He said the incremental cost of an ELF seat is approximately RM25-RM35. Since the average charge is RM90 per seat, the ELF campaign is totally self funded, he added. Idris also pointed out that AirAsia has been given various forms of subsidies including initially zero and subsequently lower airport charges as well as funding of the budget airline's brand on English Premier League referees, not to mention outstanding amounts owed by AirAsia/FAX to MAS and Penerbangan Malaysia. "In our Business Turnaround Plan (BTP), we clearly stated that we will take back full accountability for our P&L statement without subsidies but we also said that we must be given the freedom to operate our business as a commercial venture," he said. He said Prime Minister Datuk Seri Abdullah Ahmad Badawi has clearly stated publicly that the Government would not bail out the airline financially. "This is a good thing because it forced accountability and consequently, we must fix our own financial problems without any aid from the Government. In line with this, we now run our business as a commercial entity," he said. In the last two years, MAS has axed several international routes which were not commercially viable as part of its Business Turnaround Plan, he said. These routes, which include KL-Vienna, KL-Manchester, KL-Kuching-Perth, KL-Penang-London, KL-Langkawi-London and KL-Cairo, account for some seven per cent of the MAS total network capacity. On the domestic sector, Idris said: "When we were asked by the Government to take back the rural air services from AirAsia/FAX, we agreed that we would only take them back with subsidies from the Government." AirAsia/FAX also obtained subsidies for the rural air services when they operated these routes, he said, adding that in the spirit of transparency, MasWings was formed so that there is clear separation of the P&L statement between MAS and MasWings. Idris also commented on the impending liberalisation of Asean air routes and MAS' reaction to this development. He said: "All Asean countries have agreed to the Asean liberalisation roadmap which allows for the liberalisation between the capital cities starting January 2009. "But our competitor lobbied intensely for the premature opening of this route despite the clearly agreed timetable by all the Asean governments. And despite our protest, this route is now partially open. "While we accept open competition, we also believe that there should not be any change in ‘goalposts’. "Although we are not happy, we have graciously accepted the Government's decision to allow budget airlines to ply the sector." Based on the Asean liberalisation timetable, AirAsia is free to fly as frequently as it wants to between KL and Singapore, he added. — Bernama
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