Malaysia's AirAsia prepared for price war with rival ValuAir

Fri, 23 Apr 2004

Agence France-Presse Kuala Lumpur

Malaysian no-frills carrier AirAsia is prepared for a price war with Singapore's first budget airline, ValuAir, to protect its market share, a report said on Thursday.

"We have said that when we have more competition, we will just have to lower our price ... we can go very low. That's the only formula we know," AirAsia chief executive officer Tony Fernandes was quoted as saying by the Business Times.

Fernandes was commenting on ValuAir's announcement Wednesday that it will begin twice-daily flights to Bangkok from Singapore on May 5.

ValuAir is offering a promotional round-trip fare to Bangkok for S$138 Singapore (US$82) but the deal ends on May 21 and it is not clear how much flights would cost after that.

"Our fares are still lower," said Fernandes.

AirAsia already flies twice-daily from Singapore to Bangkok through its joint venture Thai AirAsia Ltd. A one-way ticket starts from S$59.99 Singapore.

"Singapore-Bangkok is the most competitive route (in the region). There are 12 airlines already operating the route," Fernandes said.

"As long as we offer passengers low-cost flights, I believe we will have a market," he said.

On the status of AirAsia's application for a license to set up base in the city-state, Fernandes said: "I don't think we are going to get it. I think we will be last on the list (of the Singapore authorities' considerations)."

ValuAir, started by former Singapore Airlines managing director Lim Chin Beng, beat a host of rivals to become the first budget airline to base itself out of Singapore.

A Singapore Airlines-backed consortium called Tiger Airways and an as-yet unnamed no-frills carrier involving Australia's Qantas airlines also intend to operate from Singapore.

AirAsia, started in 2001, initially served the Malaysian market but has rapidly expanded regionally in recent months with intra-Thailand flights as well as the Singapore-Bangkok route.

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