Business

Case for govt. to assist airlines

Ahirul Ahirudin
Written by Ahirul Ahirudin

KUALA LUMPUR – June 13, 2020: Two experts agree that Malaysia will lose out if the government fails to assist home-grown airlines hit hard by Covid-19 restrictions.

The country will, among other things, face a potential pricing power issue if the government decides to leave the fate of airlines solely to market forces, pointed out independent analyst Mohshin Aziz. 

He also referred to the multi-billion dollar rescue packages by other governments as a case in point. 

“Take Cathay Pacific and Singapore Airlines for example. The governments of Hong Kong and Singapore are forking out  US13.3 billion (RM56.5 billion) and US5 billion (RM 21.2 billion) respectively.

“There’s a reason for this, besides just ensuring the survival of the airlines, and that is to counter against potential pricing power by others. If these airlines close shop, the rest will have more power.

“If it is destined that the surviving airlines are not one of ours, we will have little say on pricing and locals could end up having to pay more to travel.” .

On a recent report that claims that Malaysia will fork out RM1.49 billion to help three airlines, Mohshin, a formerly an aviation analyst with Maybank, said the amount is in fact far from enough.

“If this is equally shared by the three airlines, it is not even a Panadol. Just take a look into the cost of operations of each airline.

“Looking into the annual report for AirAsia last year, I think the operating cost is close to RM2 billion and this is just AirAsia. Malaysia Airlines has an even bigger operating cost,” he said.

Last week, a foreign wire reported that the Malaysian government was planning a US$350 million package to help local airlines in the immediate term.

The Mole learnt however  that no such package was being considered.

“Not that we know of,”  said a source. 

Other unconfirmed reports suggest that airlines were resorting to desperate measures including retrenchments to stay afloat as a result of the pandemic.

“If the situation doesn’t improve and the government won’t help, we can expect more waves of lay-offs. In a worst case scenario, the carriers will have to close,” said Mohshin.

Associate Professor Ahmed Razman Abdul Latif of Putra Business School agrees that the government should assist.

He however suggested for the government to provide full assistance only to Malaysia Airlines while the shares of privately-owned AirAsia and Malindo should be bought by Khazanah Nasional.

The Star newspaper reported that Korea’s third-largest conglomerate SK Corp could buy up 10 per cent of AirAsia because it sees the potential of consolidating its own position this way.

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Ahirul Ahirudin

Ahirul Ahirudin