Making flying easy and cheap (Pt 1)
Moaz Yusuf AhmadPublished: Nov 5, 2007 5:49 AM | Updated: Jan 29, 2008 10:21 AM
After Oct 29, 2007, the skies over the Klang Valley have become just a little bit busier.
And people living and working in Subang Jaya may hear the sound of planes flying over a little bit more often. The sound will probably not cause much of a disturbance. In fact, the rain storms are probably louder.
But the arrival of Firefly at the Sultan Abdul Aziz Shah (Subang) Airport has actually been quite thunderous.
The arrival of Firefly at the Subang Airport marks a major stage in the transition of the airline industry from direct service to the "hub-and-spoke" approach.
All over the world, flag carriers like Malaysia Airlines and Air Canada are now focusing on lucrative international routes and domestic trunk routes, while regional and domestic service is handled by low cost and community airlines.
This is happening because direct point-to-point service is slowly disappearing in all areas of the transport industry, from trains to bus to airlines. As transport operators are focusing on improving efficiency and reducing costs, multimodal services will become more and more important.
After Oct 29, 2007, the skies over the Klang Valley have become just a little bit busier.
And people living and working in Subang Jaya may hear the sound of planes flying over a little bit more often. The sound will probably not cause much of a disturbance. In fact, the rain storms are probably louder.
But the arrival of Firefly at the Sultan Abdul Aziz Shah (Subang) Airport has actually been quite thunderous.
The arrival of Firefly at the Subang Airport marks a major stage in the transition of the airline industry from direct service to the "hub-and-spoke" approach.
All over the world, flag carriers like Malaysia Airlines and Air Canada are now focusing on lucrative international routes and domestic trunk routes, while regional and domestic service is handled by low cost and community airlines.
This is happening because direct point-to-point service is slowly disappearing in all areas of the transport industry, from trains to bus to airlines. As transport operators are focusing on improving efficiency and reducing costs, multimodal services will become more and more important.
Restructuring the airline industry
More than two years have passed since Malaysia Airlines began its corporate restructuring. In that time the face of the aviation industry in Malaysia has changed.
The increased costs of airline operations have led to more airlines looking for ways to increase efficiency and reduce costs. Adopting the "hub-and-spoke" approach is one way to do so.
Thus, the restructuring of Malaysia Airlines led to a cutback in routes served by Malaysia Airlines, as the flag carrier focused its operations on the highly profitable international routes and major domestic trunk routes.
International routes were cut from 114 to 90 and domestic routes from 118 to 22. The less profitable domestic and international routes, including the Rural Air Service devolved from the hands of Malaysia Airlines into FlyAsianExpress (FAX).
This reduction in the number of routes service by Malaysia Airlines, in exchange for increased profitability, was matched by the aggressive expansion of Air Asia
In fact, the arrival of Air Asia and the growth of the low-cost industry have led to significant expansion in demand for flights, especially regional flights within Southeast Asia.
Increased demand has led to more calls for open competition in the airline industry, especially for international routes.
Air Asia CEO Tony Fernandez has gone on record many times stating his support of open competition and open skies agreements. This would cement the expansion of Air Asia into the marketplace by picking up golden routes like KL-Singapore and KL-Hong Kong.
At the same time to low-cost industry is attempting to expand into the long-distance or "long-haul" market.
In early 2007, FlyAsianExpress gave up the remnants of the domestic routes and rural air service in order to concentrate on the low-cost, long-haul market, under the corporate and brand name Air Asia X.
These routes were taken over by two "community airlines" namely, Firefly (serving mostly West Malaysia) and Maswings (serving mostly East Malaysia).
Are we ready for competition?
The arrival of Firefly to Subang Airport raises a lot of questions about the competitive state of the airline industry in Southeast Asia. Firefly will soon be operating from four hubs: Penang, Subang, Johor Bahru and Kota Kinabalu.
This gives Firefly the opportunity to fly one of the most lucrative routes in Malaysia, between KL and Penang. In addition, since the airline operates planes with a maximum range of well over 1,500 km, Firefly could easily connect KL to destinations like Bangkok and Jakarta, which are approximately 1,200 km away.
On Oct 25, the government has announced that Air Asia would be allowed to fly to Singapore on four routes, including the KL-Singapore route.
The anticipated liberalization of the skies in Southeast Asia will lead to increased competition and increased demand for flights.
Since the government is offering this opportunity for Firefly and Air Asia to expand, we have to wonder what competition will be like in the local and regional airline industry over the next five years, leave alone the next decade.
In fact, with the Asean Open Sky Policy, which begins on Jan 1 2009, even tiny Firefly would have an opportunity to pick up a place on the lucrative KL-Singapore route.
But for now, the presence of Firefly means that there will be four airlines (Malaysia Airlines, Air Asia, Firefly, and Berjaya) offering scheduled air services within Malaysia. Is there room in this market for so many competitors? Who will win and who will lose?
National rail service
As the airline industry expands to a state of heightened competition one has to wonder what will happen to the national rail service.
Currently we are seeing a massive investment in rail infrastructure in the west side of Peninsular Malaysia. The government is embarking on the double-tracking and electrification of the KTM railway on the west side of Peninsular Malaysia.
Soon, the railway will be double-tracked and electrified from Seremban to Ipoh. The double tracking and electrification projects will continue on from there. In the north, there will be an extension from Ipoh to the border with Thailand at Padang Besar. In the south, there will be an extension to Senawang and Gemas.
Malaysia will see its first rapid train service between Kuala Lumpur and Ipoh within two years and there will likely be a KTM Komuter Utara servicing Butterworth and a KTM Komuter Selatan servicing Johor Bahru by 2012.
At the same time, the Malaysian government has indicated it is ready to approve the High-Speed Rail link (proposed by YTL Corp.) between Kuala Lumpur and Singapore.
This expansion of passenger train services will prove to be vital for Malaysia, especially as oil prices and petrol prices are continuing to rise.
However, there is a concern that the double tracking and electrification may bring more benefits to the freight service than to the passenger service. The double tracking will allow KTMB to expand freight services by more than 10 times. However, there is not much information about how double tracking will improve existing passenger services.
This is in part because KTMB runs trains using the 'metre-gauge,' which is designed to facilitate freight train travel rather than passenger train travel. Passenger train travel requires higher speeds and this requires wider track gauge.
The Express Rail Link between KL Sentral and KLIA uses the 'standard gauge' of 1435 mm, while the Shinkansen trains (the bullet train) and other high speed rail usually use 'wide-gauge' of 1500 mm or 1600 mm.
So double tracking will bring the best benefits for the freight service, rather than passenger service.
Losing in the long term
And, with the expansion of low cost domestic air services, the rationale for investment in high speed passenger rail, such as the KL-Singapore High Speed Rail link proposed by YTL Corp, or the government's proposed Fast Rail Link between Cities (FIRST) will become just a little bit weaker.
Questions will probably be raised about why the government continues to invest in rail infrastructure to support 'money-losing' passenger rail.
Arguments will be made for cutting rail services and replacing them with passenger bus services. The airline industry will probably be highlighted as an example of a growing, successful industry, while trains will be criticized as old, nostalgic, and slow.
This will be unfortunate, because the truth is that passenger rail services are far more efficient at moving people than airplanes, including the low-cost airlines. It is also a fact that roads and airports in Malaysia (and in much of the world) are heavily subsidized by the government.
Given the opportunity and the same level of government support, high-speed passenger rail has been proven to be faster, lower in cost, more efficient, and more environmentally friendly than all other modes of transportation.
In the short term we will see more competition between the airlines, and passengers may benefit from potential "price wars" between the airlines.
In the long term, however, Malaysia will lose if it does not invest in passenger rail services with the same level of attention and support that it is giving to the airlines industry and the freight rail services.
(Continues tomorrow)
And people living and working in Subang Jaya may hear the sound of planes flying over a little bit more often. The sound will probably not cause much of a disturbance. In fact, the rain storms are probably louder.
But the arrival of Firefly at the Sultan Abdul Aziz Shah (Subang) Airport has actually been quite thunderous.
The arrival of Firefly at the Subang Airport marks a major stage in the transition of the airline industry from direct service to the "hub-and-spoke" approach.
All over the world, flag carriers like Malaysia Airlines and Air Canada are now focusing on lucrative international routes and domestic trunk routes, while regional and domestic service is handled by low cost and community airlines.
This is happening because direct point-to-point service is slowly disappearing in all areas of the transport industry, from trains to bus to airlines. As transport operators are focusing on improving efficiency and reducing costs, multimodal services will become more and more important.
Restructuring the airline industry
More than two years have passed since Malaysia Airlines began its corporate restructuring. In that time the face of the aviation industry in Malaysia has changed.
The increased costs of airline operations have led to more airlines looking for ways to increase efficiency and reduce costs. Adopting the "hub-and-spoke" approach is one way to do so. Thus, the restructuring of Malaysia Airlines led to a cutback in routes served by Malaysia Airlines, as the flag carrier focused its operations on the highly profitable international routes and major domestic trunk routes.
International routes were cut from 114 to 90 and domestic routes from 118 to 22. The less profitable domestic and international routes, including the Rural Air Service devolved from the hands of Malaysia Airlines into FlyAsianExpress (FAX).
This reduction in the number of routes service by Malaysia Airlines, in exchange for increased profitability, was matched by the aggressive expansion of Air Asia
In fact, the arrival of Air Asia and the growth of the low-cost industry have led to significant expansion in demand for flights, especially regional flights within Southeast Asia.
Increased demand has led to more calls for open competition in the airline industry, especially for international routes.
Air Asia CEO Tony Fernandez has gone on record many times stating his support of open competition and open skies agreements. This would cement the expansion of Air Asia into the marketplace by picking up golden routes like KL-Singapore and KL-Hong Kong.
At the same time to low-cost industry is attempting to expand into the long-distance or "long-haul" market.
In early 2007, FlyAsianExpress gave up the remnants of the domestic routes and rural air service in order to concentrate on the low-cost, long-haul market, under the corporate and brand name Air Asia X.
These routes were taken over by two "community airlines" namely, Firefly (serving mostly West Malaysia) and Maswings (serving mostly East Malaysia).
Are we ready for competition?
The arrival of Firefly to Subang Airport raises a lot of questions about the competitive state of the airline industry in Southeast Asia. Firefly will soon be operating from four hubs: Penang, Subang, Johor Bahru and Kota Kinabalu.
This gives Firefly the opportunity to fly one of the most lucrative routes in Malaysia, between KL and Penang. In addition, since the airline operates planes with a maximum range of well over 1,500 km, Firefly could easily connect KL to destinations like Bangkok and Jakarta, which are approximately 1,200 km away. On Oct 25, the government has announced that Air Asia would be allowed to fly to Singapore on four routes, including the KL-Singapore route.
The anticipated liberalization of the skies in Southeast Asia will lead to increased competition and increased demand for flights.
Since the government is offering this opportunity for Firefly and Air Asia to expand, we have to wonder what competition will be like in the local and regional airline industry over the next five years, leave alone the next decade.
In fact, with the Asean Open Sky Policy, which begins on Jan 1 2009, even tiny Firefly would have an opportunity to pick up a place on the lucrative KL-Singapore route.
But for now, the presence of Firefly means that there will be four airlines (Malaysia Airlines, Air Asia, Firefly, and Berjaya) offering scheduled air services within Malaysia. Is there room in this market for so many competitors? Who will win and who will lose?
National rail service
As the airline industry expands to a state of heightened competition one has to wonder what will happen to the national rail service.
Currently we are seeing a massive investment in rail infrastructure in the west side of Peninsular Malaysia. The government is embarking on the double-tracking and electrification of the KTM railway on the west side of Peninsular Malaysia.
Soon, the railway will be double-tracked and electrified from Seremban to Ipoh. The double tracking and electrification projects will continue on from there. In the north, there will be an extension from Ipoh to the border with Thailand at Padang Besar. In the south, there will be an extension to Senawang and Gemas. Malaysia will see its first rapid train service between Kuala Lumpur and Ipoh within two years and there will likely be a KTM Komuter Utara servicing Butterworth and a KTM Komuter Selatan servicing Johor Bahru by 2012.
At the same time, the Malaysian government has indicated it is ready to approve the High-Speed Rail link (proposed by YTL Corp.) between Kuala Lumpur and Singapore.
This expansion of passenger train services will prove to be vital for Malaysia, especially as oil prices and petrol prices are continuing to rise.
However, there is a concern that the double tracking and electrification may bring more benefits to the freight service than to the passenger service. The double tracking will allow KTMB to expand freight services by more than 10 times. However, there is not much information about how double tracking will improve existing passenger services.
This is in part because KTMB runs trains using the 'metre-gauge,' which is designed to facilitate freight train travel rather than passenger train travel. Passenger train travel requires higher speeds and this requires wider track gauge.
The Express Rail Link between KL Sentral and KLIA uses the 'standard gauge' of 1435 mm, while the Shinkansen trains (the bullet train) and other high speed rail usually use 'wide-gauge' of 1500 mm or 1600 mm.
So double tracking will bring the best benefits for the freight service, rather than passenger service.
Losing in the long term
And, with the expansion of low cost domestic air services, the rationale for investment in high speed passenger rail, such as the KL-Singapore High Speed Rail link proposed by YTL Corp, or the government's proposed Fast Rail Link between Cities (FIRST) will become just a little bit weaker.
Questions will probably be raised about why the government continues to invest in rail infrastructure to support 'money-losing' passenger rail.
Arguments will be made for cutting rail services and replacing them with passenger bus services. The airline industry will probably be highlighted as an example of a growing, successful industry, while trains will be criticized as old, nostalgic, and slow.
This will be unfortunate, because the truth is that passenger rail services are far more efficient at moving people than airplanes, including the low-cost airlines. It is also a fact that roads and airports in Malaysia (and in much of the world) are heavily subsidized by the government.
Given the opportunity and the same level of government support, high-speed passenger rail has been proven to be faster, lower in cost, more efficient, and more environmentally friendly than all other modes of transportation.
In the short term we will see more competition between the airlines, and passengers may benefit from potential "price wars" between the airlines.
In the long term, however, Malaysia will lose if it does not invest in passenger rail services with the same level of attention and support that it is giving to the airlines industry and the freight rail services.
(Continues tomorrow)
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