Malaysian aviation sector to spur growth next year

The announcement of Malindo Airways' entry, made early this year, is one of many news making events that shook the industry in 2012 apart from the aborted Malaysia Airlines and Air Asia Bhd share swap deal in May, the delivery of Malaysia Airlines (MAS)' first Airbus A380 in June and a recent firm order placed by AirAsia for an additional 100 Airbus A320 aircraft.

The new low-cost airport, Klia2, scheduled for operation in May 2013, is also expected to increase the number of airlines arriving in Malaysia, thus increasing competition in the low-cost segment.

With so much competition expected in the local aviation industry next year, national carrier, Malaysia Airlines, remains cautiously optimistic of a challenging operating environment.

MAS Managing Director Ahmad Jauhari Yahya expressed this optimism since Malaysia is located within the centre of the aviation industry's future growth hub.

"As increased demand will be driven by emerging markets, a host of low-cost carriers now offer value-for-money travel and increased competition, thereby putting pressure on yields of all airline players.

"In addition, rising fuel costs, demand shocks and seat over-capacity with the entry of new players like Malindo will continue to bring challenges," he said.

AirAsia Bhd Chief Executive Officer Aireen Omar and her Firefly counterpart, Ignatius Ong, are both excited to welcome 2013, despite being aware of the intense competition the airlines could face next year.

The main contributing factor to the confidence is believed to be the clear network expansion roadmap that both the airlines have in hand, in addition to the deliveries of many new fuel-saving and efficient aircraft.

Aireen said AirAsia was used to competition in the aviation industry, thus its operations or future plans would not be disrupted with the entry of Malindo.

"All our future new routes will only cost us marginal expenses and effort, as it will be complemented by the brand and network that we have built in the past 11 years.

"This is different from a new airline, which has to start and establish itself in every sector of the industry," she said.

Ong, on the other hand, said being an industry player, Firefly cannot deny possible competition, but the airline has always seen this challenge as an encouraging factor to keep the team focused on the community airline's value and aim to produce outstanding results.

"(The) Key point is to keep to what we are good at, strengthen it further and tap even more customer base, moving forward. This will ensure that we can be a brand that customers trust and they will come back time and again," he added.

Meanwhile, OSK Research Aviation Analyst Ahmad Maghfur Usman also foresees intense competition in the Malaysian aviation industry, with a potential price arising from more competition in the low-cost segment.

He said Malaysia Airlines would not be involved in the price war as the full-fledged airline preferred to stick to its niche premium segment.

"More competition in the low-cost segment is definite and this will lower airfares and, hence, stimulate more demand for travel given the discount in airfares.

"So in any price war, if it does happen, AirAsia's fares will be impacted as Malindo has promised to introduce even lower discounted airfares.