With a boutique airline and an ‘open skies’ policy, everyone can fly

 

I fully support the idea of Sabah and Sarawak wanting to set up their own airlines. The more airlines there are, the better it is for travellers.

Airlines should be allowed to compete among themselves in an “open skies” policy subject to one important condition: ceiling airfares must be imposed for travel between the peninsula, Sabah and Sarawak.

I have in a previous column explained why ceiling airfares are needed and must be formulated immediately.

Boutique airlines

Whether the proposed new boutique airlines are owned by the state or otherwise should not be a major concern.

The Terengganu state government used to own one – MacAir – in the mid-1990s. Sarawak still owns Hornbill Skyways. The plan is to turn it into a boutique airline.

A boutique airline is commonly understood as one which serves more up-market customers, usually made up of the elite or those in the business fraternity. Such services are best offered by privately-owned airlines.

An airline in this segment does not usually cater to the mass market, which is made up of a large majority of low-income travellers. This segment only requires a basic service – something which is cheap, safe and convenient.

It does not require elaborate, sophisticated services, filled with all the frills of a full-service airline, or the exclusivity of a boutique airline.

Mass market

The government of Malaysia via Khazanah Nasional owns Malaysia Airlines, through which it also owns Firefly and MASwings.

MASwings was specially set up to provide air services to the rural areas of Sabah and Sarawak, and is heavily funded, with its operational costs also subsidised by the Federal Government.

There are also a few privately-owned airlines, including one which has substantial foreign ownership, operating between West and East Malaysia. They are all classified as low cost airlines.

Taking into account the current trend, will Malaysia allow foreign-owned airlines to operate between the peninsula, Sabah and Sarawak?

In what is termed an “open skies” policy, many countries are now allowing foreign-owned airlines to operate selected domestic routes, with the twin objectives of injecting competition and increasing capacity.

For example, a European airline currently operates directly from its home country to KLIA, and then onwards to Jakarta.

It is considered a full-service airline but has surprisingly been able to offer cheaper fares for the KL-Jakarta-KL sector compared to its Malaysian and Indonesian rivals.

As a result, this airline has managed to attract a sizeable number of Malaysian and Indonesian passengers via a loyalty programme.

The airline has successfully applied marginal cost pricing as its main strategy to corner the market in this sector.

‘Open skies’ policy

Allowing foreign airlines to operate our domestic sectors, including those connecting the peninsula with Sabah and Sarawak, is another option for us to consider.

The aviation authority and the states concerned should seriously consider this “open skies” policy subject to certain conditions.

Apart from setting reasonable ceiling fares, local airlines could also become the foreign airlines’ partners in specific sectors. They could enter into code share agreements and be allocated blocked seats for marketing.

These arrangements are quite common nowadays and have been implemented across many countries and regions, including in Europe and the Middle East.

Some of these long-haul airlines have large capacities which can be put to use. We need to tap into their available resources.

Our domestic markets will stand to gain if our aviation authority is smart, proactive and willing to research and negotiate the terms of cooperation with these foreign airlines.

Cooperation will spare domestic operators the need to invest heavily in the purchase of more aircraft to cater for a sector that is characterised by fluctuating and seasonal demand.

The level of service on offer by foreign airlines will also raise the capability and efficiency of local airlines.

These foreign airlines can also bring in more foreign tourists to our markets, including to Sabah and Sarawak.

The foreign airlines, especially those already calling at KLIA, have a role to play in resolving the difficulties travellers between KL and Sabah and Sarawak face presently.

The European airlines presently servicing the KL- Jakarta – KL market offer us a model that our aviation authorities can use.

Perhaps, small extensions to Kuching and Kota Kinabalu airports may become necessary, but these will only incur marginal costs.

More airlines mean more capacity can be made available for these important sectors.

The question is, are we willing to open our skies? - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.