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NEWS UPDATES Asean Affairs                      10  August 2011

Malaysia air pact: no price-fixing

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The agreement between full-service carrier Malaysia Airlines and low cost carrier AirAsia and its sister airline AirAsia X, should not viewed as a move to reduce consumer choice in terms of air fares but rather a means of facilitating growth for these airlines.

There have been market concerns that the collaboration between both airlines could lead to "price-fixing" of air fares to ensure route profitability and yields do not come under further pressure.

Ultimately, the fear is that consumers may be at the losing end as they may then have limited air travel options, more so for domestic flights now that AirAsia and MAS' major shareholders Tune Air Sdn Bhd and Khazanah Nasional Bhd have signed a share swap deal and collaboration agreement.

However, concerns that there could be "pricing-fixing" or a potential "cartel" were dispelled by the shareholders of both airlines as well as the deal adviser yesterday.

First, the collaboration agreement between MAS, AirAsia and AirAsia X will only come into effect after an anti-trust analysis is completed.

"We will be looking at all the anti-trust provisions in all the markets the three global airlines operate in," said CIMB group chief executive officer Datuk Seri Nazir Razak said at the press conference yesterday after the signing ceremony of the collaboration framework between the airlines.

Both AirAsia and MAS said in their respective statements to Bursa Malaysia yesterday that the collaboration agreement would only be committed upon once an anti-trust analysis had been completed and was in compliance with the applicable laws with regards to anti-trust.

Locally, the Competition Act, which will be enforced from next January, prohibits anti-competitive agreements and abuses by dominant players.

Essentially, the anti-trust analysis by the local airlines will see them making the necessary anti-trust assessments for the areas they intend to collaborate, such as network and the viability of interlining passengers, and seek all necessary and desirable anti-trust approvals before undertaking or implementing them.

If there is any anti-trust, competition or other equivalent legal requirement under the collaboration agreement that does not allow such matters or transaction to be undertaken unless certain legal requirements are complied with, then such matter or transaction will not be proposed or undertaken until legal requirements have been complied with, both companies clarified in Bursa statements.

Under the collaborative agreement, the idea is for MAS to focus on being a full-service premium carrier, AirAsia at being a regional low cost carrier (LCC) and AirAsia X focusing on being a medium-to-long haul LCC, subject to appropriate anti-trust review.

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