Saturday, December 03, 2011

Featured Article: Why AirAsia Fighting The Airport Tax

Good article posted on Business Times:

  • Why AirAsia is fighting airport tax hike

    By Presenna Nambiar Published: 2011/12/03

    AIRASIA Bhd could be bent on challenging airport operator Malaysia Airports Holdings Bhd's (MAHB) airport tax hike as a means to combat its own fast-rising charges.

    Checks done by Business Times showed that the gap between Malaysia Airlines and AirAsia's long haul arm AirAsia X fares is fast closing in on a few routes.

    A check on fares for London in January showed the fare difference between the two airlines was less than RM1,000.

    For example, on both MAS and AirAsia X fares (excluding fees and taxes) for a return trip to Paris in January showed that MAS' fare was RM1,841 while AirAsia X's fare was RM2,108 (excluding baggage and meal charges) for return.

    The differentiating factor, however, was its fees and taxes. MAS' charges stood at RM1,359 while AirAsia X's charges were RM606.

    The increase in fees in AirAsia X are from a RM80 (return) carbon offset surcharge to be implemented in 2012.

    It is believed that this charge is connected to the European Union Emissions Trading scheme, which comes into force January 1 2012.

    The ruling requires airlines to pay up for carbon emissions, which have not been accounted for, in its air space.

    "It could be because of all these charges that are coming up now. I guess they don't want to add on any other charges that don't actually help ease their own costs," an analyst who declined to be named said.

    On claims that MAHB was profiteering from passengers, another analyst pointed out that a quick calculation of profit against number of passengers handled would show which company profits more from passengers.

    A check showed that according to 2010 profit before tax (PBT) figures, AirAsia makes twice more money from passengers than MAHB.
    MAHB made RM445 million in PBT for 2010, while AirAsia earned some RM1.1 billion in PBT.

    According to this, AirAsia made RM42 per passenger, while MAHB earned RM15 per passenger. Only half of the 57.8 million passengers handled by MAHB are taken into account as it only collects airport tax one way.

    "AirAsia is not being inconsistent to itself. Before it complies it's always visibly shown how unhappy it is. I think at the end of the day however, it will follow the letter of law and pay up if they have to," Maybank Investment Bank Bhd analyst Mohshin Aziz told Business Times.
The following was published on Star Biz yesterday.
  • Friday December 2, 2011
    AirAsia and Malaysia Airports urged to bury the hatchet and move on
    Friday Reflections - By B.K. Sidhu

    IT does not look like the fight between Tan Sri Tony Fernandes and Malaysia Airports Holdings Bhd (MAHB) is going to end any time soon.

    On Wednesday night, a day after MAHB explained why it would cost RM3.6bil to RM3.9bil to build KLIA2, AirAsia boss Fernandes fired yet another salvo. This time, his target was not the use of aerobridges, the high cost of KLIA2 or the MPs who questioned the AirAsia-MAS share swap. Instead, he was gunning for the rise in passenger service tax (PSC).

    In his tweet, he said: “To all Malaysians. AirAsia has made flying affordable for all. Before, it was just for the rich. We won't allow Malaysia Airports to keep wasting money and increase charges for you. We will fight. Our campaign starts tomorrow.''
    Yesterday morning, many AirAsia customers received an e-mail with the headline “Say NO to AIRPORT TAX INCREASE.'' This is the latest effort by Fernandes to garner support against MAHB over the airport operator's recent move to raise the PSC.

    Initially, AirAsia was against collecting the PSC on behalf of MAHB. However, yesterday, the airline announced that it would continue to do so. Interestingly, it was MAS AirAsia's new partner that first wrote to MAHB to say it wouldn't collect the PSC effective Dec 1. Not long after that, it reversed the decision. Similarly, AirAsia's sister company, AirAsia X, had also send a similar letter to say it would not collect, but as soon as it was faxed over, it was withdrawn.

    To recap, airport tax is imposed by the airport operator and is regulated by the Government. The world over, any traveller wanting to depart from any airport has to pay taxes for the use of airport facilities. The rates vary from country to country.

    MAHB only got to raise the PSC after nine years of trying to convince the Government to give the greenlight. The new rates are RM25 to RM32 for travel via low-cost carrier terminal, which translate to a RM7 raise, and RM51 to RM65 (RM14 hike) for other airports in the country.
    The next review is due in 2016, said MAHB managing director Tan Sri Bashir Ahmad at a recent briefing. He made it clear that the rate would remain even though the company is building a new airport for low-cost travel.

    By turning to the passengers, Fernandes wants the travelling public to be the jury in deciding if the RM7 increase in the PSC is justified. His critics, on the other hand, have pointed out that AirAsia and AirAsia X too have introduced charges that can be a burden, such as the RM10 fee for counter check-ins.
    AirAsia's very public attacks against MAHB is seen as a power struggle, and in most power struggles, there are losers. The question in this case is what will be the consequences if Bashir loses and what would it mean for MAHB; and if Fernandes loses, what would be his next move?

    It is unfortunate that both parties cannot seem to work things out amicably. Perhaps they should spell out exactly why MAHB needs to raise the PSC and why Fernandes is so against the move.

    MAHB and AirAsia should remember that both are Malaysian companies, and while both want to be seen to be doing their jobs MAHB needs to make money in managing airports and Fernandes needs to make sure travellers do not pay more they can avoid outburst in the public domain.
    It is about time they bury the hatchet and find a solution that benefits all.

    Deputy news editor B.K. Sidhu is amazed at the magnitude of work involved in building KLIA2.


ronnie said...

MAHB is ultimately owned by the rakyat; Air Asia must be able to compete on a level playing field.