The Malaysian Cabinet - Malaysian Airline

The Malaysian cabinet, by moving to remove Malaysian Airline's (MAS) floor price on its domestic airfares recently, has given the green light to favoured son, MAS to slash prices. With glee, MAS has signalled it will, very much to the annoyance of AirAsia, which claimed such a move contradict key elements of the MAS-AirAsia route rationalisation policy.

MAS has basically declared an airfare dogfight with AirAsia. Much as so-called analysts may allude to the public benefitting from an airfare war between MAS and AirAsia, this would be true only in the short run. The long term aftermath will see the travelling public pay more, plus all flow-on costs passed down to the general public.

Airfare battles are waged for two reasons. The first seems healthy where there is competition between two airlines offering the public the best deals. But the ultimate objective doesn't stop there, for the second and the real reason of an airfare dogfight is to cripple the other, the one with shallower pockets.

In such an air battle, the competitors would offer ridiculously low airfares that even the most undiscerning traveller would know thatb it can't be logical business sense. But hey, it's offered, so let's not look a gift horse in the mouth but grab it and forget about the other airline - unless it too offers even more ridiculously low airfares.

The consequences for the competing airlines are brutal, with each slashing prices as if they don't have a care for profits. One has to have very deep pockets to play this kind of up-the-ante game (or should it be down-the-ante). 'Slash, slash, slash the price' would be the battle cry; outlast the competitor financially would be the battle objective. When airline X has crushed airline Y into virtual bankruptcy or ruin, it will roost the coop alone, albeit much poorer.

But not for long, because it would then in its monopolist position and begin its recouping operations. Bet you it would want to recoup its temporary losses in a speedy fashion. The public would be the one to cough up real big.

Airline deregulation in the US has seen a multitude of carriers crushed one by one until a dozen biggies remain, those with very deep pockets. In Australia, many newcomers have been emasculated. Some had been foolish enough to start a price war for it merely expedited their commercial demise. Now Australians pay through their nose for air travel, presumably not only for the 'normal' costs plus profits but also a component towards the recouping exercise. The increased fuel prices has added to the adverse cost situation.

So for Malaysians, the longer term consequences of a price war between MAS and AirAsia will be the public paying more instead