AirAsia's barriers to keep competition away (5099)

by **hlk** Sat 15 Sep 2012, 10:05

AirAsia Bhd has formed several natural entry barriers in the low-cost
aviation business since its inception 10 years ago, to keep many
competitors out of the frills-free carrier's ring, says Chief Executive
Officer, Aireen Omar.

She said AirAsia has one of the best cost
structures for an airline in the Asian region, while possessing a
strong brand and image as well as a sound safety record.

"This
is something difficult for anybody to try to compete with us. However,
this is something that we are ready, if there is any challenge to
come," she said, referring to the newly launched low-cost carrier,
Malindo Airways.

She said even though Malindo Airways was
formed through a joint-venture between National Aerospace and Defence
Industries Sdn Bhd (NADI) and PT Lion Grup, it is still a fresh player
in the low-cost aviation industry.

"We have seen many competitions since the inception of AirAsia as a low-cost airline. Malindo Airways is not an issue for us.

"As
far as AirAsia is concerned, Malindo Airways is a value-based airline.
It is in the middle of low-cost and premium class," she said.

Malindo
Airways is expected to begin operations on May 1 at the new low-cost
carrier terminal, klia2 in Sepang, taking off with a fleet of 12 Boeing
737-900ER aircraft to destinations between big cities in Malaysia and
Indonesia before expanding to other Asian countries.

The new
airline is also considering offering low fares, even lower than
AirAsia, in addition to the in-flight entertainment systems and
in-flight connectivity in all of its aircraft.

Asked whether the new airline will create a price war, Aireen said she does not expect a very aggressive price war.

"At
the end of the day, the companies must ask themselves whether their
cost structure allows them to do so (price war)," she added.

On
the sudden drop of AirAsia's share price upon the announcement of the
new low-cost airline, Malindo Airways, Aireen said: "We are not
worried. It is just an over-reaction.

AirAsia's stocks, which
closed at RM3.19 on Tuesday (the day of the announcement), shed 17 sen
to RM3.02 on Wednesday and fell another seven sen to RM2.95 yesterday.

It rebounded today to close 15 sen higher at RM3.10. Bernama