issue in price competiton between MAS airlines and air asia

Malaysia Airlines denied the accusation by AirAsia that it was using international
subsidies to finance its “Everyday Low Fares” campaig, as it launched its zero-fare campaign for local as well as for Southeast Asia destinations in May 2008. There are accusations made against Malaysia Airlines that it is practicing predatory pricing.

The debates on the predatory pricing test have shown that finding a cost measurement technique that can be used in the test is problematic. Tune Air Sdn Bhd acquired the equity in AirAsia became Malaysia‟s second national airline. AirAsia became the first low fare, ticket less airline in Asia. It offers a simple “no frills” service at fares that are on average significantly lower than those offered by normal full-service airlines. Since AirAsia introduced its low fare and no frills concept, the airline now flies to various destinations in Malaysia, Thailand, Indonesia, Singapore, China, Philippines, Brunei, Cambodia, Laos, Vietnam and Myanmar. Also, AirAsia formed two successful joint ventures in Thailand (Thai AirAsia), and in Indonesia (Indonesia AirAsia). The fundamental concept of running a low fare carrier is the ability to manage a very low cost of operation. First, AirAsia operates on a non-ticket service that saved the airline about US$1 for each ticket. Second, it offers no meal or other services. Instead the airline sells meals and snacks to the passengers. Third, AirAsia works through supply chain management to get its supply-part inventory.

In 1973, Malaysia introduced Malaysian Airline Limited, which subsequently was renamed Malaysian Airline System, or simply known as Malaysia Airlines. Malaysia Airlines and Air Asia has a big different in term of price. It focused on profitable growth in the face of big challenges in the airline industry including overcapacity, intense competition with yields and profit margins eroding, and rising fuel costs. Under the new business turnaround plan, Malaysia Airlines‟ vision is to become the World‟s Five Star Value Carrier with a mission to be consistently profitable. In order to achieve this mission, it has adopted five business strategies (5-star products and services, lower costs, competitive fares, get more customers and more revenue, and, grow network and build capacity).

I think, the aim of competition is to direct resources to the uses that will give the best benefits to consumers in the short run as well as in the long run. The consumers are benefiting because they pay low fares. Everybody can fly now without really burning their pockets. In conclusion, the price competition between Malaysia Airlines and AirAsia has benefited the consumers.

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