Air Asia-MAS Deal Raises Questions About Competition

Ask most travelers in Malaysia, and they will say that the arrival of AirAsia has made not just tickets more affordable more broadly across the market, but also that it has put pressure on Malaysia Airlines to improve its product.

Are passengers now headed for a major setback on that front? Malaysia only has two major airlines - AirAsia and Malaysia Airlines - but now there is talk the two carriers could soon be aligned thanks to a share swap deal that AirAsia's co-founders Tony Fernandes and Kamarudin Meranun are working on with MAS's major shareholder Khazanah Holdings, the Malaysian Government's investment company.

In many other countries, the prospect of two carriers coming together would set off alarm bells among competition authorities. However, in Malaysia, there appears to be no such regulatory hurdle.As long as the government is happy with the deal, it will go through.

If Malaysian passengers have one thing to give them hope, it is that the low-fare sector in Asia is booming more broadly, so even the combined AirAsia/MAS force faces growing competition that should limit their ability to dictate travel terms; unless, that is, the government curbs their growth in a bid to protect the home-grown businesses.

Tags: tw99, airasia, malaysia airlines