Malaysia new budget airline aims for cheaper fares than AirAsia

 

MYAirline is aiming to compete on price in Malaysia's airline industry dominated by AirAsia and Malaysia Airlines. (Photo courtesy of MYAirline) 
KUALA LUMPUR -- Malaysia's MYAirline plans to begin commercial operations by the end of this year, with its CEO saying it can sell cheaper fares than domestic rival AirAsia -- the region's leading low-cost carrier.

CEO Rayner Teo sees demand for low-cost air travel rising as Asia emerges from COVID pandemic restrictions. MYAirline hopes to stand out with cheaper tickets, better real-time customer support and punctual flights.

"We believe we can easily offer cheaper flights based on cost structure," Teo, also the carrier's co-founder, told Nikkei Asia in a recent interview at its humble operation center above a shopping mall in Subang Jaya, near the capital Kuala Lumpur.

Although MYAirline is the David to AirAsia's Goliath, Teo and senior management are confident of their strategy, with some of them having gained experience at the airline owned by the Tony Fernandes-led Capital A.

Kathleen Tan, MYAirline's chief executive adviser, logged 13 years working for Fernandes, who with another investor led the purchase of AirAsia in 2001 which eventually shook up the region's travel industry with low cost fares and no frills service.

MYAirline's cabin operations manager Mohd Izwan Razak, meanwhile, was on AirAsia's payroll for 17 years. Teo himself worked at the airline for 15 years until July 2019, leaving as the group head of sales.

Teo said he had not planned to fill MYAirline with ex-AirAsia staff, but that he had simply recruited those who had lost their jobs or been placed on furlough, including pilots and cabin crew, over the last two years when airline operations were drastically reduced because of the pandemic.

MYAirline CEO Rayner Teo worked for 15 years at AirAsia. (Photo by Hakimie Amrie)

MYAirline, which has received a license to operate from the Civil Aviation Authority of Malaysia, plans to start with three secondhand Airbus A320s, but aims to increase its fleet size to 50 within the next five years.

"We have signed some attractive deals with very large lessors," Teo said, though he declined to provide details.

Capital A's Fernandes has refrained from commenting when asked recently by reporters about the MYAirline venture and the competition it could bring.

Analysts say that MYAirline faces some challenges in competing on cost in an environment that includes established carriers AirAsia and Malaysia Airlines.

"The airline is being marketed as an ultra-low-cost carrier, which is an interesting concept as AirAsia's average cost per seat is one of the lowest in the industry and hard to beat," said Shukor Yusof of Endau Analytics.

Separately, Brendan Sobie, an independent aviation analyst, said that the start of MYAirline will intensify competition and bring back the problem of overcapacity that plagued Malaysia before the pandemic. Citing Malaysia Airports figures, Sobie said domestic passenger traffic in the country in August was at just 66% of pre-COVID levels in August of 2019, with international traffic at an even lower 38%.

"There will be some stimulation as fares decline, possibly to pre-COVID levels, but this is hardly sustainable given today's high fuel cost environment," he said. "Prior to the pandemic domestic yields were very low and none of Malaysia's domestic airlines was profitable."

Teo said the airline will use Kuala Lumpur International Airport as its central hub, plying domestic routes before expanding to international destinations after one year.

A check with the Companies Commission of Malaysia showed that MYAirline has two million shares at one ringgit each, amounting to 2 million ringgit ($430,000) in paid-up capital. Private firms Zillion Wealth and Trillion Cove Holdings -- both owned by local businessman Goh Hwan Hua -- have stakes of 88% and 10%, respectively, in the airline. Teo owns the remaining 2% share.

According to the website of money lender Trillion Cove, Goh who is listed as its CEO and director, has more than 20 years of experience managing information technology and application-related businesses in Malaysia, Thailand, Singapore and Indonesia. The site said he had been involved in various industries, including e-commerce, e-ticketing, fintech, retail and tourism.

Teo said owning a commercial airline has been a longtime dream of Goh's.

"He has been asking me for the last seven years about the idea of forming an airline, and my answer has always been the same to him, that there are many ways to waste your money," Teo said.

"But in October 2020, when he (Goh) asked again, I thought this was the best time" to start preparing, he added, referring to the collapse in the global aviation sector due to travel restrictions and border closures.

Correction: This story has been amended to show that the airline's license was given by the Civil Aviation Authority of Malaysia (CAAM) and not the Malaysian Aviation Commission.  - asia.nikkei.