Published October 7, 2008

Price war set to erupt on Singapore-KL air route

Number of flights to double soon; more East M'sia services also on the way

By VEN SREENIVASAN
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(SINGAPORE) The skies between Singapore and Malaysia could get more crowded in the months to come, and airfares could drop significantly.

Less than two months from now, flights between the Republic and Kuala Lumpur are set to double to 29 daily.

Yesterday, the two countries also inked a deal allowing Jetstar Asia and Tiger Airways the right to operate a total of seven weekly flights between Singapore and each of the East Malaysian towns of Kuching, Kota Kinabalu and Miri from Nov 1. This will be increased to 14 flights a week per city from March 2009.

Malaysia's AirAsia is also expected to start similar services, effectively giving travellers another 14 weekly flights per city from Nov 1 out of Singapore, and 28 flights from next March.

Currently, SilkAir and Malaysia Airlines (MAS) operate a total of 18 weekly flights between Singapore and Kota Kinabalu, and 14 weekly flights between Singapore and Kuching.

All this comes on the heels of Singapore Airlines regional subsidiary SilkAir's announcement that it would start twice-daily services between Singapore and Kuala Lumpur by the end of this month, before bumping it up to four daily flights from Dec 1.

Together, SilkAir, SIA and MAS will operate 15 daily flights between Singapore and KL from Dec 1.



On the same day, AirAsia, Tiger Airways and Jetstar will also, collectively, bump up their KL-Singapore services to 14 daily flights.

This means the six carriers will, in total, operate a whopping 29 daily flights between Singapore and Kuala Lumpur, doubling the current capacity and making it one of the 'thickest' regional routes in this part of the world.

Not surprisingly, observers see the potential for an all-out fare price war, heading into the year-end festive season.

'Fares are likely to come down, and yields could suffer,' said Vincent Ng of Standard & Poor's Asian Equity Research.

Under existing arrangements, Asean countries have agreed to free up capital city-to-capital city flights from January 2009, and fully liberalise Asean skies to member airlines by 2015. The latest moves by Singapore and Malaysia suggest the two countries may have decided to bilaterally expedite their air liberalisation timetable.

What started as a tentative trickle in February, with limited access to the lucrative Singapore-KL route for Jetstar Asia, Tiger and AirAsia, is now turning into a full-fledged torrent. Travellers, who have benefited as fares started falling from a high of over $400 (what SIA and MAS used to charge) to about $150 for a low-cost flight, must be cheering.

More so if the latest developments prompt incumbents MAS and SIA to up the ante against the budget upstarts.

'The full-service carriers are adopting the same strategies on the KL-Singapore route which they used on the Bangkok-Singapore route three years ago,' said Mr Ng, referring to the price war which broke out when budget carriers entered the route.

In short, there is a potential for 'blowout' fares on the route as full-service carriers attempt to fill seats and put pressure on their low-cost competitors.

However, the profile of the Singapore-Bangkok traveller is somewhat different from the Singapore-KL flyer, note some observers.

'While low fares appeal to the more leisure-inclined traveller on the Singapore-Bangkok flight, it remains to be seen if such a strategy would work just as well on a route which sees a larger proportion of business day trippers,' said one airline executive.

'Leisure travellers to Malaysia and Kuala Lumpur have traditionally preferred to travel by road.'

Clearly, there are interesting days ahead.