Air-Asia-MAS Collaboration: Competition Law alone will not protect consumers

This is an opinion by independent, not-for-profit research institute REFSA (Research for Social Advancement) released on Monday, 7 Nov 2011 following an article published in the Sun newspaper on Monday, 31 Oct 2011.

The above opinion had been submitted as a letter to the editor to the Sun last week, on 2 November. To the best of our knowledge, the Sun has not published our letter.

LATEST UPDATE: The Sun has published our letter today, 10 Nov 2011.

Original posting here.

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In a attempt to justify the AirAsia-MAS merger, the article ‘Competition law and the airline industry’ published in the Sun on Monday Oct 31, boldly asserts that the merger may be beneficial to consumers in due course if the airlines ‘comply with the applicable laws, including competition law.’ This is a huge ‘if’ and we view this with concern.

It is naïve to assume that compliance with laws by the airlines will happen naturally.

Indeed, MAS (though it has denied the allegation) recently agreed to an out-of-court settlement of RM10.3 million on a lawsuit over over ‘price-fixing of airfreight shipping services and related surcharges. Also, at one time AirAsia had accused MAS of unfair competition and predatory pricing. Obviously adherence to regulations has not always been MAS’ strong point.

If alarm bells are not ringing already, they should be.

More significantly, less than 3 months after the collaboration was announced thousands of air travellers  from Johor to Kuching, Kota Kinabalu, Surabaya, Bandung and Bangkok  have been left in the lurch following flight cancellations by Firefly. Where are the so-called benefits then?

What REFSA (Research for Social Advancement) feared has become reality. Flights have been reduced, to the frustration of ordinary Malaysians, and the detriment of flight and cabin crew and other Malaysians who now have fewer job opportunities. It is now only a matter of time before air fares go up and more flights are cancelled. Fewer flights does not just affect travellers and airline staff. It also means less work for taxis, hotels and all the other things travellers want, besides less opportunities for entrepreneurs to meet and create new business

These issues were highlighted in REFSA’s media release,   “Air Asia – MAS tie-up: Ordinary Malaysian Consumers will be the Losers?” on 12 August. Everyone was pleased when AirAsia came on the scene and broke MAS’ monopoly. Fares became lower, flights were more frequent and flight destinations were increased.

Will the reverse be true now that AirAsia and MAS have joined forces and a competitive market no longer exists? Monopolies and oligopolies are driven by profits, and public interest is almost always put on the back burner or sacrificed for the ‘greater good’ of the business. Once the element of choice is removed, the consumer is at the mercy of the business.

MAS’ multitude of problems has been dragging on over the last decade or so. In trying to rescue the airline, a competitor is turned into collaborator. The question is, will AirAsia’s involvement halve the problems or double them, and is the public always going to get the short end of the stick?

REFSA believes the interest of Malaysians will best be served if AirAsia and MAS remain as competitors. Surely a suitable candidate can be found from the global aviation industry to take on the role of MAS’ partner. We remain deeply sceptical of this collaboration.

Sandra Rajoo

Contributing Editor

REFSA – Research for Social Advancement

[email protected]

You can also download the PDF version here.