AirAsia-MAS merger: What about Firefly?

In this corporate merger between MAS and Air Asia, Firefly is the victim.

COMMENT

The whole deal involving AirAsia and Malaysia Airlines (MAS) reminds me of the carving out of spheres of influence between the superpowers of the 18th and 19th century.

The English got Malay peninsula and the Dutch got the East Indies. They signed a treaty.

In a very similar way, this government of ours allowed the airline industry to be carved out between what they currently assessed as the poster boys.

Well, at least they see one as a poster boy – AirAsia’s Tony Fernandes.

MAS will be assigned to compete in the premium sector while AirAsia is effectively given the monopoly to handle the low-cost carriers (LCC).

Are we incapacitating MAS? Perhaps.

MAS, being competitive and back on the recovery track, would pose a threat to AirAsia, especially in the domestic market where Firefly operates from both Skypark (Subang) and KLIA.

This could be the motivation for Fernandes to be in MAS so as to “control” its growth.

We all know how Fernades has played out MAS, first with the Sabah and Sarawak routes, then the Singapore route. This could be another game that could finally check-mate MAS.

And what about Firefly?

We haven’t heard a spokesman from this outfit being given a fair airing, have we?

I am sure they will have a thing to say. Why ask Firefly to compete with Silk Air and not offer LCC services?

Fernandes must have asked and demanded for a clear product offering by MAS and AirAsia – in other words: you, MAS, get out from the low-cost carrier market and give us the monopoly.

And you know what must be done next, don’t you? Remove Firefly.

Consolidating grip on industry

Fernandes’ demand for clear product segmentation effectively removes MAS and AirAsia from destructive competition.

Poor Firefly will be realigned as a regional full-service carrier, conceding more yields to AirAsia.

Those who left AirAsia to join Firefly will now find themselves back under the whip-lashing AirAsia supervisors.

The clear mandate given by Khazanah Nasional Bhd for AirAsia to be the only low-cost carrier in Malaysia should allow it space to consolidate its grip on the low-cost market.

In other words, AirAsia has the monopoly.

But how was Khazanah able to persuade Fernandes? I don’t think it’s bully tactics. Fernandes can’t be cowed into accepting something that is not profitable to him.

He has clashed with the government on many issues – ownership over the name of F1 team, aerobridges, moving AirAsia headquarters elsewhere, and other issues.

So what profit can AirAsia extract once Khazanah play ball?

AirAsia management now confident

Well, immediately I think, those problems connected to its airport-related battles such as the use of aerobridges at the new LCCT (low-cost carrier terminal), being forced to move from Kota Kinabalu International Airport or even trying to get the name changed from KLIA2 to LCCT2, will now likely be a significantly less arduous task than before.

AirAsiaX will likely be reapplying for the much-fought-for Sydney route, something that management is more confident now of getting.

With this share swap, where the government owns more of AirAsia, AirAsia acquires an almost new national identity.

Now it can get voting rights on landing and flight routes. Not unlike those “pendatang haram” getting ICs and getting rights to vote.

So for AirAsia, having Khazanah as its substantial shareholder is a strategic move. Overnight political lobbying and fighting for routes and infrastructure have disappeared.

It now frees up AirAsia’s management resources as now its management can focus on other regional joint ventures like Japan instead of having to fight in its own territory.

The writer is a former Umno state assemblyman and a FMT columnist. This excerpt is from his blog sakmongkolak47.