Thursday, February 01, 2007

Airline price war - maths don't add up

I recall my painful schoolies, especially my maths class when Mrs K used to 'help' me (with a ruler on my knuckles, 'ouch') remember that 'you couldn't get something out of nothing', though of course I would dispute her teachings today, given the magical maths of UMNO.

Then delectable Miss L taught me about the 'conservation of energy', that P.E would be converted into K.E or even heat energy, or as I jumped off the springboard at the Penang Chinese Swimming Club, into one mighty big splash (and a chewing from the lifeguard), BUT the sum of all the (various forms of) energy should remain the same.

With this background maths philosophy, I worry about the current airline price war. I've blogged on this issue in Scorpion-like airline price war? over at BolehTalk. We know what the scorpion is like, don't we?


  1. air asia is only giving a few seats per flight... but they do recover from fuel surcharge, air port tax and administration

    Malaysia Airlines? They are fighting for a share of the pie they have been eating FOC for so long.


  2. I think airport tax goes to the airport, for various stuff like airport admin, maintainance, security, etc.

    Airlines get their income from air ticket fee (cargo too), sales of tax-free stuff on board, advertisement of goods in their own lounge or aircraft, I think that's it!

    The business startegy of a profitable airline is minimum cost (the principal exercise area) and max profit (difficult when competing, at least until it kills off the opposition, which is what MAS aims to do with AirAsia - a foolhardy attempt)

    But MAS should be careful not to fool around with the no-frill aspects as that's AirAsia's speciality and strategy, a concept pioneered by Herb Kelleher with his famous Southwest Airline in the States.

    MAS must make up its mind whether it wants to be a no-frill airline like AA or a national-type airline like SIA and Qantas.

    By its national prominence and significance it shouldn't be a no-frill airline. It can of course develop its own subsidiary no-frill airline like the other two major airlines. Qantas has Jetstar and SIA has (can't remember the name).

    The problem with MAS is it's inward looking, jealous (want to grab all - its main problem, hence not focusing on what it should be doing) and worried about AA, when it should be forming a strategic partnership with AA.

    I suspect it has no decent strategy, unlike SIA who went for the upper end of the market, only coming into no-frill very late in its life.

    The problem with minimising cost is fraught with safety concerns. Safety measures cost money but the benefits aren't so apparent, and only missed when too late, after a drastic accident. So the safety measures would be the first to go.

  3. Ktemoc,
    Agree with you on the minimising cost part. From the tauke point of view (which I am not, but could guess, like from car owning experience), the easiest way to cut cost is safety: preventive maintainence/service frequency, change tyre/oil or not, etc etc. But one thing to counter this stupid safety-last-money-first mentality is: if something bad really happen, it will cost REPUTATION and TRUST. I dont think that is something that can be bought easily...