Should Malaysia Airlines have a budget carrier sister?

[Muhammad Firdaus 0]

Intensifying competition from budgets carriers have been blamed for MH loses for the year ended August 31.

http://asia.nikkei.com/Business/Companies/Malaysia-Airlines-warns-of-2016-loss?page=1

[JuliusWong 0]

The next article linked to the above story says it all:

 

Shakeout looms for Asian budget airlines

 

http://asia.nikkei.com/Business/Companies/Shakeout-looms-for-Asian-budget-airlines

[geoff.leo 0]

It should, but it shouldn't.

 

In an ideal world, MAS would have two product lines - one to maintain it's full service business and another to compete in the low-cost segment.

 

But it's in no position to take out such a risky venture at this stage. It needs to get its house sorted out first and get back to basics. It's still some distance from achieving that. To venture now into the low-cost business would be biting more than it can chew.

 

To enter the game now would be to go against the mighty groups of AirAsia, Cebu Pacific, Lion, and soon the Vietnamese.

 

Tiger/Scoot might have finally broken even. But that's with the current low oil prices. Moving forward and looking at the deliveries, over-capacity at Tiger/Scoot will become an issue. They can't, and probably will never, match AirAsia's unit cost, yet fight for the same low yield prices and routes. One wonders if it would have stayed afloat if it wasn't for the backing and intervention by SIA/Temasek.

 

SIA, a well-run, profitable company with about four times MAS' annual revenue is still struggling to make it's LCC business work. And yet it has had it's fair share of burnt fingers over the years.

 

MAS would just end up with chopped hands.