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Airasia Forced Out Of Sibu-KK Route: CEO


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#21 rayner

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Posted 07 August 2009 - 02:03 PM

AirAsia wants to get back Sibu-KK route
By Nancy Lai

KOTA KINABALU: The exclusive rights of MASwings to service rural air routes in the country has been given as the reason behind the termination of AirAsia’s flights between Sibu and Kota Kinabalu.

AirAsia chief executive officer Datuk Seri Tony Fernandes said MASwings had protested to the government about AirAsia servicing the route.

MASwings has exclusive rights to the route and the government has no choice but to instruct AirAsia to stop servicing it, he said.

“We (AirAsia) are appealing the decision because we think it is important for our network. Many people from Sibu want to travel to Kota Kinabalu and connect to other destinations and vice versa.

“So that is the reason. We would like to continue covering the route because it is good for tourism and for the economy. We were caught by surprise by the MASWing’ protest and to learn that the airline has exclusive rights to the rural air service routes.

Tony, when explaining about the termination of the Sibu-Kota Kinabalu flights to reporters here yesterday, said AirAsia would ask the government to open up rural routes to commercial airlines.

He explained that to allow a commercial airline to service rural routes would mean that the government would spend less money on subsidy to MASWings.

“Then everyone can save more money,” he said.


On MASwings’ protest, Tony believed that it was because the airline had been losing money servicing the route.

“If you are losing money on the route and AirAsia comes in, you lose more money and the government pays for it, so there is logic to it. The question is, if a commercial airline can make money on it, does the government need to subsidise the route?

“MASwings should be really concentrating on routes for public service that you cannot make money on,” he said.

Tony added that AirAsia will be refunding those who had purchased tickets for the Sibu-Kota Kinabalu sector either in cash or credit for another AirAsia flight because it was the airline’s responsibility and not the customers’ fault.


Early this week, it was reported that AirAsia would cease its KK-Sibu direct flights as it had received a directive from the government last week.

The report quoted a spokesperson for AirAsia’s head office in Kuala Lumpur as saying that the airline had no alternative but to follow the directive and stop flying the route from Oct 25.

AirAsia started its daily Sibu to Kota Kinabalu flights in April this year, and operates with its Airbus A380 which has a capacity of 180 passengers.


Meanwhile, it is learnt that the Transport Ministry is looking into AirAsia’s appeal and would come up with a solution soon.

A source said the ministry was also studying the initial agreement which gave AirAsia the rights to service the Sibu-Kota Kinabalu route.

The same source said that the government would have to look into the definition of ‘rural air routes’.

“Does the term ‘rural routes’ apply to Sibu-Miri, Sibu-Kuching or Sibu-KK sectors? The general perception is that routes linking smaller towns are considered ‘rural’.

“The government has to redefine the meaning of rural routes,” the source said.


http://www.theborneopost.com/?p=56109

#22 Tamizi Hj Tamby

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Posted 07 August 2009 - 02:56 PM

I've noticed the error on the article: Airbus A380?? :blink:

Wah,that's mean SBW can accept A380 eh? lol. <_<

#23 ksauyong

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Posted 07 August 2009 - 03:33 PM

If Sibu-KK is deemed a rural route, Airasia should not protest and give dubious reasons like "good for the economy and good for tourism".
If the people want to travel to KK, they can use Maswings. What is the problem for them?
We must follow rules and regulations. If we start breaking them without valid reasons, there will be no end to breaking the rules and then only the well connected will benefit.
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#24 Seth K

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Posted 07 August 2009 - 03:53 PM

^^^^^^^i think u'll get flame for that :P

#25 flee

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Posted 07 August 2009 - 08:28 PM

If Sibu-KK is deemed a rural route, Airasia should not protest and give dubious reasons like "good for the economy and good for tourism".
If the people want to travel to KK, they can use Maswings. What is the problem for them?
We must follow rules and regulations. If we start breaking them without valid reasons, there will be no end to breaking the rules and then only the well connected will benefit.

The irony is that the people of Sibu and Kota Kinabalu likes the AirAsia service and their flights are packed. Rules are good for orderly conduct. However, if the rules outlive their usefulness, a review should be done. From the report, I believe that the MoT is now reviewing this situation.

Unfortunately the Borneo Post still does not realise the difference between an Airbus A320 and A380!

#26 GeO

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Posted 07 August 2009 - 09:42 PM

Sure people want AirAsia because the fare are much more cheaper than MAS Wings. MAS Wings much more expensive. Maybe for rich2 taiko and businessmen on business trip only. And Sibu-KK shouldn't be considered as rural service. Sibu is not rural like Long Lellang, Long Akah all these. Sibu is a developing town.

#27 Radzi

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Posted 08 August 2009 - 12:20 PM

We keep on forgetting that AirAsia group was given ALL the rural air services once. Why screw it up then?
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#28 Cheng Long

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Posted 08 August 2009 - 12:54 PM

We keep on forgetting that AirAsia group was given ALL the rural air services once. Why screw it up then?


Easy.. Last time Air Asia die die wanted to fly the rural air service. After they realized it was a burden, they die die wanted to get rid of it.

I remember the reason given was something like "Oh, MAS going to use turboprop planes for Firefly. Then why not ask MAS to take over the rural flights then since these also involve turboprop planes".

The gov thought it was such a brilliant idea. In a flick, the rural flights with its fleet or cannibalized / poorly maintained Fokker 50s and Twin otters were back to MAS. (Did Air Asia pay for the repair then? The news just sizzled out so I don't know..)

As time goes by, Air Asia becomes smarter. They realized their early mistake. Now they don't want the total package, but only the profitable routes.

Uncle Tony said, "MASwing should be really concentrating on routes for public service that you cannot make money on". In other words, MASwing, you can have all the loss-making routes that you want.

#29 flee

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Posted 08 August 2009 - 01:58 PM

Well it was Fly Asian Express (D7) that was established to operate those routes. I believe that AirAsia (AK) was forced to take this burden off MAS as the price they had to pay for the govt. to open up domestic routes to AK. However, D7 soon found out that the subsidies paid by the govt. were not adequate and their services deteriorated since they cannot rely on cross subsidies from AK. I believe that MASWings now has a better deal with the govt.

So it was a win-win situation - D7 got rid of their loss maker to focus on international routes. MH got a better deal from the govt. and new aircraft for the service. AK got their access to domestic routes. Even the govt. comes out looking good in this scheme of things!

#30 Cheng Long

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Posted 09 August 2009 - 07:40 AM

Well it was Fly Asian Express (D7) that was established to operate those routes. I believe that AirAsia (AK) was forced to take this burden off MAS as the price they had to pay for the govt. to open up domestic routes to AK. However, D7 soon found out that the subsidies paid by the govt. were not adequate and their services deteriorated since they cannot rely on cross subsidies from AK. I believe that MASWings now has a better deal with the govt.

So it was a win-win situation - D7 got rid of their loss maker to focus on international routes. MH got a better deal from the govt. and new aircraft for the service. AK got their access to domestic routes. Even the govt. comes out looking good in this scheme of things!


Is that right? Very different from what I heard and observed. Where did you get the news from?

I remember Uncle Tony was very gung ho to take over those routes and MH was adamant they could still managed. And Air Asia got massive subsidies upfront but of course, you can't make huge profit flying the rural air service.

I'm also not so sure about the better deal now. Was told that MASwing has no freedom of control over pricing of their tickets. It's tightly regulated by the gov. The people of East Malaysia certainly are not getting a good deal. Ever since Air Asia took over, the fares just skyrocketed and it remained high until now. The fares are simply not affordable for many. If the gov is of any good, they should reduce the fares as the rural flights are a necessity. If they can throw out huge subsidies each year for highways in West Malaysia, they should do more for rural flights in East Malaysia. We don't have highways and our roads treacherous. Rivers?..Well, forget it.
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#31 Tim Lee

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Posted 11 August 2009 - 03:15 PM

When the Rural Air Services was handed over to Air Asia (which was operated by FAX), Air Asia demanded for and was given the whole of the RAS exclusively (including the KK-Sibu sector). MH had to abide by this.

And when they found that they cant operate RAS profitably, they took their spoils and dumped it (in its sorry state) back to MH. Now AK wants to cherry pick again playing on the people as a means of getting what they want.

The basis of the RAS is for the more profitble route to cross subsidise the lesser ones. In the end if this route is given to AK, then it is the people's money that will be used to pay for the other routes.

A recent internal communications says that MASWings got only 50% of the subsidy paid to FAX for RAS. If indeed MASWings got a better deal, I am sure Uncle Tony will be the first person at the PM's door every morning to either cry foul or to have RAS returned to AK, being the clever man that he is.

There seems to be no end to this man.

Edited by Tim Lee, 11 August 2009 - 03:16 PM.

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#32 Tamizi Hj Tamby

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Posted 11 August 2009 - 04:35 PM

From Borneo Post Online:


Sibu-KK route must stay: Lau
By Philip Wong

Deputy minister leaving no stone unturned to make sure AirAsia flights between the two points are maintained

SIBU: Deputy Transport Minister Datuk Robert Lau yesterday promised to stick his neck out and ensure the AirAsia Sibu-Kota Kinabalu route stays.

“Tomorrow (Wednesday), I will bring up the matter during the weekly cabinet meeting.

“Hopefully, we can reach a solution to that problem as soon as possible,” he said when members of the Federation of Chinese Association Sarawak, led by their president Datuk Lau Cheng Kiong, called on him and presented a memorandum.

Among others, the memorandum said AirAsia had provided a much better alternative to MASwings and the people would very much like to see AirAsia continue to operate the Sibu-KK route.

In addition, the memorandum also lamented the expensive freight charges of MASwings over the Sibu-Kuching, Sibu-Miri, Miri-Limbang and Sibu-KK routes and hoped the Transport Ministry would review the matter.

Lau, who is Sibu MP, said he was aware of the popularity of AirAsia’s Sibu-KK route since it started last April.

“In view of its popularity, I will ensure that we will reach a solution with regard to the Sibu-KK route,” he said.

Lau said discussion with the Transport Minister Datuk Seri Ong Tee Keat on the matter was ongoing, and he had instructed the department in his ministry which controls the airlines to review the contract between MASwings and the Transport Ministry over the rural air service in Sabah and Sarawak.

According to Lau, FAX initially took over the rural air service, but did not give satisfactory service and eventually gave up the sector.

The government then negotiated with MAS to continue servicing the routes and subsequently, MAS came up with several conditions.

A contract signed between MAS and the ministry in October 2007 had given the national carrier the rights to all seven routes in the two states, some of which would be exclusive to it.

“The contract is for 10 years. The government will also provide an annual subsidy of RM8 million to MAS,” he said.

Every year MAS and AirAsia have to send their proposed flight schedules to the ministry for approval.

“Recently when it did so, AirAsia also slipped in its application to serve the Sibu/Kota Kinabalu route which was approved,” Lau said.

AirAsia chief executive officer Datuk Seri Tony Fernandes had said recently that AirAsia will have to terminate its direct flight from Sibu to Kota Kinabalu from Oct 25 because it has been forced to do so.

AirAsia flies from Sibu to Kota Kinabalu daily, using Airbus 320 which has a capacity of 180 passengers.

According to a source, since AirAsia started operating the Sibu-KK route in April this year, the demand had been very good with passenger load for each flight.

This could have prompted MAS to act and when it was discovered that AirAsia was receiving popular demand, MAS lodged a complaint with the government.

On the airstrip in Kapit, Lau said the existing runway was no longer suitable for aircraft landing.

He said he had already asked Kapit MP Alexander Nanta to find a new site to build another runway.

“Once he comes up with a proper site, then we will work together for Kapit to have an airstrip as Kapit deserves to have the air services, he said
.


Response from Deputy MOT (who's also MP for Sibu).For Kapit,don't bother construct B737-A320 capable runway;Runway capable for F50/ATR 72/ (just like Limbang & Tanjung Manis) should be OK.


O/T: Now the reporter got the aircraft type right.

Edited by Tamizi Hj Tamby, 11 August 2009 - 04:39 PM.


#33 Naim

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Posted 11 August 2009 - 06:03 PM

August 11, 2009 18:23 PM

MAS Denies Forcing Airasia Out Of Kota Kinabalu-Sibu Route

KUALA LUMPUR, Aug 11 (Bernama) -- Malaysia Airlines (MAS) has denied forcing AirAsia out of the Kota Kinabalu-Sibu route, saying that it is following the rural air service (RAS) agreement.

"The Kota Kinabalu-Sibu route is exclusive to the RAS operator because AirAsia requested for route exclusivity when its subsidiary FAX operated the RAS," the airline said in a statement.

MASwings managing director Mohd Salleh Tabrani said AirAsia demanded exclusive rights to almost all of the air routes within and intra Sabah and Sarawak, including the Kota Kinabalu-Sibu route, during the domestic rationalisation.

"Under the domestic rationalisation exercise in March 2006, Malaysia Airlines was asked to give up the RAS operations and pass them to AirAsia. This included the right to offer services between Kota Kinabalu and Sibu," he said.

"Only AirAsia's subsidiary FAX had the exclusive rights to ply these routes. As such, there is absolutely no truth to AirAsia's allegation that we forced them out of the Kota Kinabalu-Sibu route," Mohd Salleh said.

"We are merely following the RAS agreement that is in place. For AirAsia to fly on the route is a breach of the agreement, the same privileges enjoyed by FAX," he said.

The RAS agreement covers exclusivity of the routes in Sabah and Sarawak whereby the airline operating the routes is given the first right of refusal in the event that the government wants to open up additional routes in Sabah and Sarawak.

"AirAsia was given the choice to operate in 2006, got more subsidy than MASwings for the same scope of air services, quickly surrendered the RAS back to MAS when they realised how unprofitable the routes were and have now decided they want to cherry pick and operate only on profitable routes," Mohd Salleh said.

"This is not acceptable as taxpayers' money is involved. We cross-subsidise profitable routes such as Kota Kinabalu-Sibu with other unprofitable routes. By doing this, we save the taxpayers' money as MASwings' profit and loss is borne by the government," he said.

In the event that changes are made to the RAS agreement, MASwings would need to review the commitment it has given to the government, Mohd Salleh said, adding that the current commitment is an annual subsidy of below 50 percent of what was paid to FAX.

"In the event of the removal of selected routes from the RAS agreement, a higher subsidy may have to be paid to MASwings," he said.

AirAsia, through FAX, took over RAS from MAS in 2006. Just 13 months later, MAS was asked to take back the RAS operations and has since been operating these routes under MASwings.

Initially, RAS in the context of MAS was designated for air services using the Twin Otter aircraft. When the government gave RAS to AirAsia, it was with an expanded scope and covers all "propeller operated services".

The separation was done on Aug 1, 2006. As a result, MAS had to retrench hundreds of long-serving staff in Sabah and Sarawak under a mutual separation scheme.

MAS said that it also handed over seven Fokker 50 and five Twin Otter aircraft to FAX in good flying conditions.

"When MASwings resumed the RAS operations on October 1, 2007, 50 percent of the seven Fokker 50 and six Twin Otter aircraft were not airworthy," Mohd Salleh said.

"As a result, we incurred about RM36 million to restore these aircraft back to operational conditions," he said.

-- BERNAMA

http://bernama.com/b...e.php?id=431951
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#34 Waiping

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Posted 11 August 2009 - 06:42 PM

Just to share a bit on the RAS from a third person's perspective.

When Air Asia was given the RAS it seems like they were not ready at all. Some rumored that they just wanted FAX to obtain a license to operate passenger aircraft. Maybe that's how they can have Air Asia X and Air Asia. During that time my impression of AK/FAX was always flight delays and cancellation without notification.

I was active on Lonely Planet's thorn tree forum back then and this guys was asking how to get from Mulu to KK at the time when Air Asia abruptly stopped the service. I advised the guy to make his way to Miri by road and try to get to KK from there on MH. Better chances of success. IIRC travel agents didn't want to promote Mulu Packages back then due to uncertainty of flights.

So that's how "professional" Air Asia can be at times.

Edit - Seems like AK also have a hand in helping MasWings get new aircraft. If they had maintained those Fokkers in good shape maybe we are still using them instead of ATR72.

Edited by Waiping, 11 August 2009 - 06:44 PM.


#35 Isaac

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Posted 11 August 2009 - 07:40 PM

"The Kota Kinabalu-Sibu route is exclusive to the RAS operator because AirAsia requested for route exclusivity when its subsidiary FAX operated the RAS," the airline said in a statement.

MASwings managing director Mohd Salleh Tabrani said AirAsia demanded exclusive rights to almost all of the air routes within and intra Sabah and Sarawak, including the Kota Kinabalu-Sibu route, during the domestic rationalisation.

:rolleyes:

#36 Cheng Long

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Posted 11 August 2009 - 08:01 PM

MAS said that it also handed over seven Fokker 50 and five Twin Otter aircraft to FAX in good flying conditions.

"When MASwings resumed the RAS operations on October 1, 2007, 50 percent of the seven Fokker 50 and six Twin Otter aircraft were not airworthy," Mohd Salleh said.

"As a result, we incurred about RM36 million to restore these aircraft back to operational conditions," he said.


So Air Asia didn't end up paying for the planes they cannibalized and poorly maintained? Perhaps they paid for it partly and refused to pay the rest like how they deal with MAHB.

#37 MHost

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Posted 11 August 2009 - 09:09 PM

Hello everyone,

I'd like to take this opportunity to comment on this conversation, and to help clarify the situation revolving around the Kota Kinabalu-Sibu route. The Kota Kinabalu-Sibu route is exclusive to the operator of Rural Air Services (RAS) because AirAsia had in fact requested for routes exclusivity when its subsidiary, FAX operated the RAS.

This took place during the domestic rationalisation exercise of March 2006, and AirAsia demanded for exclusive rights to almost all of the air routes within and intra Sabah and Sarawak, which naturally included the Kota Kinabalu-Sibu route. Only AirAsia's subsidiary, FAX had the exclusive rights to ply these routes.

Therefore, we were following the RAS Agreement that is in place, and allegations of us forcing AirAsia out of the KK-Sibu route is in fact untrue. In addition, it should also be pointed out that AirAsia is bound by the RAS Agreement and as such, cannot fly these routes, which is only afforded to FAX.

Perhaps a little more history behind what actually took place: AirAsia, through FAX, took over RAS from MAS in 2006, and received higher subsidies as compared to MASwings for the same scope of air services. However, AirAsia quickly surrendered (13 months) RAS back to Malaysia Airlines when they realised how unprofitable the routes were. Is this a case of cherry picking and choosing only to operate on profitable routes? I leave it to your kind selves to make your own conclusion.

Regardless of how this is perceived, it is clear that loss of taxpayer’s money is involved here. As many of you may know, we cross subsidise profitable routes (such as the KK-Sibu route) with other unprofitable routes. By doing this, we in fact help save taxpayer’s money, as MASwings’ P&L is born by the government. There is also the untold story of job loss, as we were forced to retrench hundreds of long serving staff in Sabah and Sarawak under a Mutual Seperation Scheme, due to the initial handover handover in 2006.

Lastly, it is also noteworthy to mention that MAS handed over seven Fokker 50 as well as five Twin Otter aircraft to FAX, all of which were in excellent flying condition. When MASwings resumed RAS operations in 2007, 50% of the Fokker 50 aircraft and almost all of the Twin Otter aircraft were not airworthy. As a result, we spent an additional RM36 million to restore these aircraft back to operational conditions.

I hope that with this, you have a clearer picture of what has transpired, and will help everyone to better understand the situation with the facts in hand.

Thank you.

Encik Mohd Salleh Tabrani
Managing Director
MASwings

#38 Tamizi Hj Tamby

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Posted 11 August 2009 - 09:25 PM

Thank you for your explanation,Mr.Mohd Salleh.

#39 flee

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Posted 11 August 2009 - 09:40 PM

Good to hear from the horse's mouth.

But I wonder why is MH suddenly so concerned about loosing taxpayers' money when it has lost billions in the past without even mentioning any concern?

#40 Radzi

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Posted 11 August 2009 - 09:55 PM

Just a reminder.




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