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Give us Sydney, not Pyongyang, says AirAsia X

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It's like "Oh, that place looks profitable. Let's got there. The other guy is doing just well. What about the others? Nah, let the others try first. If it's profitable we'll go there. If it isn't we'll not suffer any lost." :angry:

 

Maybe AK/D7 should fly to Zimbabwe lah.

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i'd say that's a typical GLC reply. you have all the money, and even if you fall, you won't get injured. put the MH CEO in a low-cost carrier or get him to start one up and we'll see what he can do? probably there will be flights even to Timbuktu! his reasoning for bringing in passengers might sound right, but how do you want to bring in MORE passengers when your fares are all much expensive compared to your nearest competitor (not D7 for sure! LOL)? i just see sheer fright within him - scared that once they lose SYD, that's probably the END of MH. one thing he has to realise is that they just make a mockery of many destinations they fly. just because many malaysians have no option, they just have to fork out whatever amount that MH will charge because a connection to either SIN or BKK is going to match that offer of theirs. if SYD is where MH's gold is, why not focus on that sector or probably pump in another few more flights a week and bring all those so called passengers they have? this battle is getting amusing, that's all!

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Historically, National policy means protectionism e.g. National Car Policy :(

 

MH losses on new routes especially those instructed by the gomen may be compensated. Hence, MH could afford to lose money on unprofitable routes for up to 5 years.

 

Politicians and civil servants are not expert in aviation industry and not responsible for the airline profit and loss account, should not assign routes. AK, D7, MH are Malaysian companies, if they can profit from new routes means more job, more tax, more revenue for the country, and the gomen should not restrict their growth.

 

:drinks:

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Do feel that there's some truth and logical explaination from the MH Dato' CEO ; A Comprehensive Civil Aviation Masterplan Policy is rather essential. Not just merely in awarding routes but to further question critical issues including relating to our tourism sector, types of tourists, GDP, Foreign Exchange, Jobs ....etc. ;

Since when is the Malaysian govt. good at doing such things? They have screwed our automotive industry and now most car manufacturers have made Thailand and Indonesia their production hubs instead of Malaysia, which they have originally earmarked.

 

Our banking industry is a different story - because of its dynamic governor. By opening the industry up to competition (even from foreign banks), merging Malaysian banks to make them stronger, etc. the Malaysian financial services industry is now thriving. We are even in the lead in Islamic banking!

 

The MH CEO seems to want to focus on FAX's debacle in East Malaysia. Even that has a happy ending because consumers ended up getting a better service with MASWings - the govt. bought new and better planes (ATR-72s) because FAX's tenure highlighted how bad the situation is with those old F-50s. So MH had the excuse to ask for new planes for MASWings. In the end our East Malaysia services are now better than ever - so the outcome of FAX's miserable flop was still positive for consumers.

 

So a comprehensive aviation masterplan will definitely be better than none. But has the govt. moved on this matter since the MH proposal? Or is it still sitting on OTK's in-tray?

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Now Tony Fernandes weighs in with his Tweets:

 

Amusing seeing tengku Azmil response .Wonder how many comms people and Pr companies crafted that.Azran is factual and from the heart .

 

Tengku Azmil spin doctors make no sense.Ask minster and ksu of tourism who applauded airasia and airasia x .Aussie tourism up 24 pcent

 

I and airasia have always asked for a independant regulator . Total rubbish saying we only now think its a good idea now.

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Air Asia X seems only interested to fly big fat routes. Good for them of course, but may not be good for the Malaysia aviation industry overall. Cause they will hurt the market in other areas.

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Air Asia X seems only interested to fly big fat routes. Good for them of course, but may not be good for the Malaysia aviation industry overall. Cause they will hurt the market in other areas.

Thats nonsense talk and carries no meaning. there is no such thing as "a big fat route'. Airlines have to fight for market share no matter which route it is. Only Mh has monopoly situation while all other airlines in the world virtually operate in an independent enviroment with competition.

 

Mh is like a rich mans son, spoilt to the max. Evertime cannot get something run crying to Papa, in this case for Mas the Papa is the goverment.

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Air Asia X seems only interested to fly big fat routes. Good for them of course, but may not be good for the Malaysia aviation industry overall. Cause they will hurt the market in other areas.

I suspect that Azran really wants his kangaroo route STN-KUL-SYD. That is the big picture he is looking at. I am sure MH is also aware of that. However, MH will have a big trump card to play - the A380. In Australia, research has shown that pax prefer to fly on the A380 and actively seek out flights and airlines which operate their routes on the A380.

 

Azran has quoted some statistics to support his case for more flights into SYD. However, he neglected to mention that some of these additional pax may have come to Malaysia indirectly via SIN:

Go to Tourism Malaysia websites, look at their 2009 numbers, inbound traffic. They look at bona fide tourists. Where are the biggest growth countries? Australia grew by 25 per cent. Now, Malaysia Airlines reduced their flights (to Australia) in 2009. So how did we get 25 per cent growth in inbound Australia tourists if it was not AirAsia X as no other airlines flies there? China grew, Taipei grew, UK grew, basically where AirAsia X flies. Korea — minus 15 per cent, Japan minus 7 per cent. So where we don’t fly, the market shrank.

 

Does competition really hurt Malaysia Airlines? If competition is really bad, and we just taking away passengers away from them, why are they adding flights to Perth? Why are they now having direct flights to Brisbane?

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I suspect that Azran really wants his kangaroo route STN-KUL-SYD. That is the big picture he is looking at. I am sure MH is also aware of that. However, MH will have a big trump card to play - the A380. In Australia, research has shown that pax prefer to fly on the A380 and actively seek out flights and airlines which operate their routes on the A380.

 

Azran has quoted some statistics to support his case for more flights into SYD. However, he neglected to mention that some of these additional pax may have come to Malaysia indirectly via SIN:

 

 

I do believe if MH has the A380 it will be their trump card against D7, but somehow it does feels like MH doesn't really want the A380.

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I do believe if MH has the A380 it will be their trump card against D7, but somehow it does feels like MH doesn't really want the A380.

 

 

Agreed rora;;y waiping. Sadly Mh has no confidence in the product. IMO MH A380 offering will be far ahead of AA, hence MH need not worry unnesaserly.

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This issue shares some similarities to what's happening in the pharmaceutical industry, a field somewhat related to my line of work. Let me give you this analogy.

 

There is this branded pharmaceutical company selling branded medications at exorbitant price. People hate them and call them various names, like greedy la, evil pharma la, bad guy and etc.

 

Then there is this generic pharmaceutical company selling generic medications at a tiny fraction of the price. Naturally they are heralded as the good guy. They are God sent!

 

Things look pretty simple at the surface. But then again, it's the branded pharma that does research for new medications. And research can easily cost millions if not billions. They sell at high price because they need to recover the cost and make some money la..

 

On the other hand, the generic ones does not do any research. They are in for the easy ride. And they often only sell the top 10% of the most lucrative medications of the branded pharma.

 

So what happen when the generic pharma starts selling the top 10% most lucrative medications of the branded pharma at a tiny fraction of the price? The branded pharma will be forced to reduce its price. They will also be forced to increase their price for other medications to recover the cost. Furthermore, there will also be less incentive for them to spend hefty amount of money to research new medications.

 

So who is the bad guy and who is the good guy? It's not so clear cut now. But both have their places and roles. You need a clear policy that will protect the rights and interests of both.

 

Some similarities can be applied to this MAS and Air Asia X thing.

 

If Air Asia X flies only to the top few most lucrative routes, then I believe it will be bad for the industry as a whole. MAS will be forced to reduce their price on those routes to compete. But they need to get money from somewhere. Fares in other destinations may be increased. Further cost cutting measures might be imposed. And importantly, there will be less incentive to fly to new destinations that may take several years to recover the cost as they can no longer compensate for the losses.

 

Not getting Sydney, Air Asia X plans to increase frequency to Melbourne and Sydney. I consider these are lucrative routes as well. It seems like they are not willing to invest in other new destinations, giving reasons like they are low cost carrier so no money. They are just not willing to spend. They already have approval for 34 destinations. It will be detrimental to Malaysia aviation industry if they only fly to top few lucrative routes as it will inhibit the growth in other areas.

 

So there need to be a clear policy that caters for both airlines.

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In the case if MH, it is a GLC. It is financially guaranteed. Therefore MH can invest with confidence - the govt. guarantees its survival..

 

For D7 to invest it needs some bread and butter routes - the cash cows. A steady stream of income will ensure that it has money to invest in the new and thinner destinations. It cannot depend on govt grants and taxpayer bail outs. It cannot be expected to invest in new routes, offer low fares, and other goodies if it does not have a main line of income and profits from lucrative trunk routes.

 

As for as the govt. is concerned, it should not be a barrier to MH or D7 when it comes to allowing them to fly any route they like. Let them try (as in the case of Abu Dhabi with D7) their destinations. Let them succeed or fail, but do not stop them from trying. If SYD cannot accommodate both airlines, one of them is bound to quit the route altogether. But as Perth and Melbourne has shown, this isn't the case - the market has expanded and even MH is increasing its flights to Perth and Emirates has joined the KUL-MEL route competition.

 

That is the fundamental difference between MH and D7 - D7 does not have the govt to support it nor bail it out. If it fails, it dies. Is that good for the Malaysian economy?

Edited by flee

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Furthermore, there will also be less incentive for them to spend hefty amount of money to research new medications.

Actually, there is a very strong incentive for spending on research for novel compounds - patent protection

 

 

On the other hand, the generic ones does not do any research.

The reputable generic manufacturers do, though admittedly not at the scale undertaken by the 'original' brands. At the very least, bioequivalence trials should be necessary, though sadly not mandated

Bear in mind novel delivery systems are also eligible for patent protection

 

 

And they often only sell the top 10% of the most lucrative medications of the branded pharma.

Don't buy that, otherwise the range of generics available will not be sustaining the generics segment of the industry :)

 

 

If one insists on the pharmaceutical analogy, then it's also necessary to note that MH has enjoyed a monopoly on the KUL/SYD route for a period substantially longer than what pharmaceutical companies normally get patent protection for on a new medication. So, would it not be fair then to allow for the 'generic' competition already ?

 

It is also possible for pharma companies to extend the period of patent protection on their products by innovating through varying means eg. improved formulation, bioavailability, etc

In MH's part of this analogy, sadly it appears our designated national carrier had over the years been contend to just rest on what it was/is product wise

Very possibly a result of as per Flee's observation above

- the govt. guarantees its survival..

And so they lumbered on until competition (in the guise of D7) came knocking at the door, ..... the story is still unfolding !

:pardon:

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Most of D7 pax are budget conscious travellers who travel on cheapest fare. As MH is unlikely to match or lower than D7 fare, as a 5 star airline, MH should be focusing on capturing market share from SQ, QF, EK, EY, BA, etc on kangaroo route. Resisting D7 operating KUL/SYD is nothing more than just to frustrate D7.

 

:drinks:

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MH needs to come up with something smart to face the competition. All it's doing so far is getting help from gomen to either defer the grant of SYD/KUL route or simply avoiding the problem.

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why sydney? profit?

Which company does not go into business for profit? Even GLCs like MH are chasing profits. The difference is that they can hide behind the government's skirt for protection. So they don't need to work so hard...

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From Business Times: War of words flares up over KL-Sydney route

 

By Jeeva Arulampalam

 

TWO Malaysian international carriers are once again preparing for a dogfight over profitable air routes.

 

Over the weekend, Malaysia Airlines (MAS) (3786) openly questioned through the media AirAsia X's insistence on wanting the rights to fly the Kuala Lumpur-Sydney route when the latter could opt to ply other international routes it has already received approvals for.

 

MAS managing director and chief executive officer Tengku Datuk Azmil Zahruddin has come out to say that AirAsia X was not keen to operate new destinations such as Manchester, Vienna and Moscow, as it realises it takes years of investment to make a route profitable.

 

"It's not fair for another airline to want to ride on the investments made by us. Instead, they need to be able to develop their own routes," he told Business Times last week.

For MAS, it may take up to five years before any new route is profitable as it must create awareness about that destination.

 

The airline spends money on marketing and carries out familiarisation exercises by bringing travel agents from Malaysia to the new destinations, and vice versa.

 

For instance, MAS invests some RM100 million annually in marketing costs alone in Australia, said Tengku Azmil.

 

The debate over the KL-Sydney route began when AirAsia X, the long-haul affiliate of budget carrier AirAsia, claimed the government was protecting the national carrier's interest by not allowing it to ply that route.

 

"One of the (unofficial) reasons cited was since MAS was forced to buy the A380 (superjumbo) jets by the government, they need the Sydney route to be protected," AirAsia X chief executive officer Azran Osman-Rani told Business Times in April.

 

While MAS plans to use two out of its six A380s for the KL-Sydney route, aviation analysts have expressed concern that MAS will face yield pressure if it utilises the A380 for this route.

 

MAS had expected to take delivery of its first A380 in August 2011, but announced last Friday that Airbus has requested that the delivery be postponed once again to the first half of 2012.

 

AirAsia X's argument for wanting the KL-Sydney route against flying to other further destinations such as Vienna or Zurich was its lack of suitable aircraft and the lower number of tourists from the latter destinations.

 

Azran has said that a daily AirAsia X flight to Sydney would bring in 110,000 passengers yearly. Instead, AirAsia could only do three flights a week to Vienna as it lacked the right aircraft, bringing in some 44,000 passengers yearly.

 

"This also results in the poor use of aircraft capacity when you fly to a destination with limited tourist appeal," he said, adding that it takes roughly one to one-and-a-half years for AirAsia X to turn a route profitable.

 

While both airlines publicly justify their arguments, air travel passengers/customers are essentially only interested in two key points.

 

One is the passenger's ability to purchase the best priced airfare to a given destination, which typically only happens when there is competition among several players and not a blanket monopoly.

 

And secondly, it is the sustainability of a route. A passenger wants to feel assured that the airline will still be flying to a given destination, having purchased the ticket six months prior to the departure date.

 

Therefore, it is important for an airline, when fighting for the rights of a route, to know that it has the ability to sustain the route despite the route's initial lack of profitability due to intense competition or need for marketing investments.

Edited by flee

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So what is the MoT's reply to this whole debate about why D7 has not been granted yet ? Why the delay ? Why the wait ? I support MH but I think D7 and AK should be allowed to open up any routes as long as it brings in cash into the country. It does not justify anything when MH tells D7 to focus on the other routes and not SYD nd ICN, its like saying "yeah, MH's SYD route is protected, but what about the time when JQ and OS operated flights into SYD rom KUL ? Why do we have to protect the national carrier at the expense of our aviation growth ? I think LKY stated that they rather make losses in SQ than to loose SIN as a hub, how ideal and see where they are now ?

 

Just a thought :rolleyes:

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For instance, MAS invests some RM100 million annually in marketing costs alone in Australia, said Tengku Azmil.

Now that is an eye opener ! :blink:

Is it money well spent though ? And is it all MH's money ? :rolleyes:

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Now that is an eye opener ! :blink:

Is it money well spent though ? And is it all MH's money ? :rolleyes:

 

 

I wonde where the RM100M was spent and how they spent it is another matter !

 

There used to be adverts on he London Taxi's and the London Buses, very few and I also recall a MH advert on the Amsterdam Tram Services. The ads I see now beside the local newspapers in Malaysia are the big huge billboards on the way to KLIA !!

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I wonde where the RM100M was spent and how they spent it is another matter !

 

There used to be adverts on he London Taxi's and the London Buses, very few and I also recall a MH advert on the Amsterdam Tram Services. The ads I see now beside the local newspapers in Malaysia are the big huge billboards on the way to KLIA !!

 

I believe it's ads expenditure in Australia to bring more people to Malaysia. Anyone down-under can enlighten us on this claim?

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Now that is an eye opener ! :blink:

Is it money well spent though ? And is it all MH's money ? :rolleyes:

 

There's a quote by an advertiser back in the olden days, "Half the money I spend on advertising is wasted; the trouble is I don't know which half."

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"Half the money I spend on advertising is wasted; the trouble is I don't know which half."

Perhaps he/she should be relieved of responsibility for the A&P budget then :)

Try pulling that stunt off at a shareholders' meeting ! :D

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It does not justify anything when MH tells D7 to focus on the other routes and not SYD nd ICN, its like saying "yeah, MH's SYD route is protected, but what about the time when JQ and OS operated flights into SYD rom KUL ? Why do we have to protect the national carrier at the expense of our aviation growth ?

That is a very good point Kuhan. MH was 'OK, no problem, I'm chill' when OS and JQ were competing with them on the KUL-SYD vv route, which raises a lot of questions on why they acting up like this when it comes to D7. And the period where OS and JQ were in the route (2005-2006 for OS) and (2008 for JQ) were the period where MH made the most full year losses (MYR 1.3 billion loss in 2005, MYR 135 million loss in 2006 and MYR 250 million loss in 2008).

 

And if my memory serves me right, MAHB is still optimistic and keep on luring JQ to return back serving the route. JQ doesn't want to. D7 wants it very badly but is being turned down over and over again. To me it's a plain double standard and clearly everything is done to frustrate D7.

 

As mentioned by others earlier, D7 promised more traffic flows (number of aircraft and passengers wise), helps KUL to reach its 'hub' status, creates more jobs, paying more corporate tax to the Malaysian government etc, but these are all being turned down to protect the loss making national carrier.

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