RAISE FARES AND LOSE CUSTOMERS, AIRLINES TOLD
Move not realistic and will affect competition, warns CAPA
AIRLINES are urged not increase airfares following the oil price recovery as the move is unrealistic and may result in them losing their customers.
“Just because oil prices have increased doesn’t mean airlines can easily raise their airfares. Fares are fluid and vary from market to market, depending on the competition,” CAPA Centre for Aviation chief analyst and Southeast Asia chief representative Brendan Sobie told NST Business recently.
He said the move would not be realistic or easy to carry out.
“If one airline raises its airfares, consumers may switch to other airlines. Therefore, it affects competition.”
Sobie said Malaysia was a competitive market, citing that Malaysia Airlines, Malindo Air and AirAsia were competing in most major routes.
“Fares and yields have been under pressure for the last few years. These airlines continue to compete aggressively and AirAsia, in particular, continues to expand rapidly and add capacities,” he said, adding that Malindo Air and Malaysia Airlines had slowed slightly in terms of growth.
Sobie said airlines preferred to increase fares and improve yields to offset the surge in oil prices, but that was easier said than done.
“Airlines change their fares all the time, depending on the market. There are always adjustments in fares all the time with promotions,” he added.
A Malaysia Airlines spokesman said the national carrier was maintaining its airfares.
“Airlines adopt a dynamic approach towards pricing, in which the earlier a passenger books, the lower the fares and higher probability to accessing promotional prices,” he said.
MIDF Research aviation analyst Danial Razak said Malaysia Airlines and AirAsia could increase airfares given the higher oil prices.
“It would be a strategic move to protect their margins from any significant contraction. Another alternative is to increase their ancillary income, which could be done by expanding their food menu and selling more duty-free products.”
He said AirAsia was one of the airlines which adopted fuel hedging, hence providing an extra cushion to absorb any jump in fuel cost.
“In this environment, it does provide a cost advantage to AirAsia, in comparison to other airlines which buy their fuel at spot price,” he said.