Price war is ending in aviation industry — Fernandes

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KUALA LUMPUR: There will be no more price war in the aviation industry in this region as airlines are tired of losing money, said AirAsia Bhd group chief executive officer (CEO) Tan Sri Tony Fernandes.

“The price war is ending not only in Malaysia, but also in Indonesia and the Philippines as [industry players] are tired of losing money. Our strategy [now] is to keep prices low but not to sink below cost,” he told reporters here yesterday.

He was responding to reports by analysts that the restructuring of Malaysian Airline System Bhd (MAS), which may include route restructuring on its medium-haul networks, will benefit AirAsia and AirAsia X Bhd.

“MAS always has had very strong support financially, which might have enabled it [MAS] to price aggressively beyond its means. I think from what we are reading Khazanah [Nasional Bhd] really wants MAS to be run commercially and we welcome that,” he told reporters.

On whether AirAsia will expand its fleet to take advantage of MAS’ restructuring, Fernandes said the aviation industry does not need more capacity and should focus instead on increasing revenue.

He added that the restructuring of MAS will result in a healthier aviation industry, with two strong airlines, which is good for the country.

It will also resolve cross-over issues between AirAsia and MAS and enable them to operate in their respective segments — MAS in the premium market and AirAsia in the low-cost segment.

Meanwhile, Fernandes said Air-Asia is also willing to employ some of the MAS employees who may be laid off under the national carrier’s restructuring exercise that was unveiled by Khazanah over a week ago.

“AirAsia’s success is down to a lot of MAS employees [as] almost 50% of our staff are ex-MAS employees. So of course we will [consider their applications],” he said.

Fernandes was speaking after announcing that the airline’s rewards programme, AirAsia Big, is partnering with Petronas service stations’ Mesra retail stores to allow their card members to redeem their points for flights or fuel.

Fernandes and Petronas Dagangan Bhd managing director and CEO Mohd Ibrahimnuddin Mohd Yunus had earlier kicked off their partnership’s campaign dubbed “Fill up and Fly Free”.

“The partnership allows us to leverage on each other’s customer databases and open up opportunities for AirAsia to provide its other services to Petronas customers. For Petronas, it opens up opportunities for more partnerships with AirAsia. The synergies between the two corporations are enormous,” said Fernandes.

Fernandes (right) and Mohd Ibrahimnuddin at the launch of AirAsia’s partnership with Petronas service stations’ Mesra retail stores yesterday. Photo by Suhaimi Yusuf

This article first appeared in The Edge Financial Daily, on September 11, 2014.