SEPANG: Do nations still need national carriers? Should airline ownership and control be liberalised?
Tan Sri Tony Fernandes, the man who helped build AirAsia into Asia’s biggest budget carrier with a current market capitalisation of RM7.1 billion, thinks Asean governments should adopt global aviation trends by freeing up airline ownership.
The 52-year-old music executive-turned-aviation tycoon cited a World Economic Forum (WEF) study that showed decades-old “nationality rule” had severely limited the ability of airlines to sell shares, seek investors or merge with other airlines.
These curbs have raised the cost of capital for airlines and denied them efficiencies of size and scope, leading to higher ticket prices and reduced demand, according to the WEF.
Fernandes said airline rules in Asean are outdated and that tight airline ownership is killing, not adding, jobs.
In an exclusive interview, he even mooted the idea of restarting the Malaysia-Singapore Airlines (MSA).
MSA was formed in 1966 as a result of a joint ownership of the airline by the governments of Malaysia and Singapore. The airline ceased operations after six years in 1972 when both governments decided to set up their own national airlines.
“Why can’t airlines in Asean own each other? Actually, maybe it’s time for some mergers. Maybe it’ll be tough for me, but if the competition is good, if I’m not good enough, then I should not be here.
“Does Asean need 10 airlines? If you look at Europe now, many airlines are merging. British Airways owns Iberia, bought Aer Lingus, Air France-KLM. There’s more of it happening.
“We have been pushing for common ownership. Lion Air has Malindo Air, Thai Lion. VietJet has an airline in Thailand. It’s time for Asean to start allowing Asean airlines, common ownership, and better use of capital.”
Asked if the national pride was the main hindrance, Fernandes said: “That’s what I don’t understand. It is one of the most bizarre things in my 14 years I have seen… that the flag carrier is almost as big as the flag.
“Now mature countries have changed that. If you think about it, what is the flag carrier of America? You don’t know, right? Pan America maybe, but now American, United, Delta, etc.
“I don’t understand why everyone is so hard up on national carriers. Does a country need a national carrier? That’s the question I ask.
“Malaysia Airports Holdings Bhd can own an airport in Turkey 100 per cent. Chinese airports can buy Frankfurt airport, they are looking at negotiating. Heathrow is owned by my friend. He is a Spanish guy. So why are airlines like this?”
On a separate subject, he said AirAsia would not join a Singapore-led initiative to start an alliance among budget carriers in the region.
“We have not been invited. But even if we were, we would not be in. It’s a mess. It’s a Singaporean-led desperate attempt to try and compete with AirAsia and AirAsia X and Jetstar.
“If you look at Emirates, they have no alliance. They’re not part of oneworld. Strong airlines don’t need it because it’s complicated.
“If you want to fly from Tokyo to Penang on Value Alliance, you need to take about four different airlines. You got to go to Hong Kong, Hong Kong to Singapore, Singapore to Penang.
“While on AirAsia X, you just go to Tokyo-KL-Penang. It’s a one-stop scenario. If there was common ownership, then Value Alliance could be something. That’s what we are proposing to have — common ownership.
“Banks can own 100 per cent. Telekom Axiata can own 100 per cent in Indonesia. Why can’t airlines in Asean own each other?” asked Fernandes.