Malaysia new budget airline aims for cheaper fares than AirAsia

Malaysia’s MYAirline plans to start commercial operations by the end of this year, with its CEO saying it can sell cheaper fares than domestic rival AirAsia – the region’s leading low-cost carrier.

CEO Rayner Teo sees increasing demand for low-cost air travel as Asia emerges from COVID pandemic restrictions. MYAirline hopes to differentiate itself with cheaper tickets, better real-time customer support and on-time flights.

“We believe we can offer slightly cheaper flights based on the cost structure,” Teo, also a co-founder of the airline, said in a recent interview with Nikkei Asia at its modest operations center atop a mall in Subang Jaya, near the capital Kuala Lumpur.

Although MYAirline is AirAsia’s Goliath’s David, Teo and management are confident in their strategy as some of them have experience at the airline owned by Tony Fernandes-led Capital A.

Kathleen Tan, MYAirline’s Chief Executive Advisor, worked for Fernandes for 13 years, who, along with another investor, led the 2001 acquisition of AirAsia, which eventually disrupted the region’s travel industry with cheap fares and no-frills service.

MYAirline’s Cabin Operations Manager, Mohd Izwan Razak, meanwhile, has been on AirAsia’s payroll for 17 years. Teo himself worked for the airline for 15 years until July 2019 and left the company as the group’s sales manager.

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Teo said he did not plan to staff MYAirline with ex-AirAsia employees, but simply recruited those who lost their jobs or were placed on furlough, including pilots and cabin crew, over the past two years when flight operations have drastically reduced was because of the pandemic.

MYAirline, which has received an operating license from the Malaysian Civil Aviation Authority, plans to start with three used Airbus A320s but intends to increase its fleet size to 50 within the next five years.

“We have signed some attractive deals with very large landlords,” Teo said, but declined to give details.

Capital A’s Fernandes declined to comment when asked by reporters recently about the MYAirline company and the competition that comes with it.

Analysts say MYAirline faces some challenges in cost competition in an environment that includes incumbent carriers AirAsia and Malaysia Airlines.

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“The airline is marketed as an ultra-low-cost carrier, which is an interesting concept as AirAsia’s average cost per seat is among the lowest in the industry and hard to beat,” said Endau Analytics’ Shukor Yusof.

Separately, Brendan Sobie, an independent aviation analyst, said the launch of MYAirline will intensify competition and reignite the overcapacity problem that plagued Malaysia before the pandemic. Citing figures from Malaysian airports, Sobie said domestic passenger traffic in the country in August was just 66% of pre-COVID levels in August 2019, while international traffic was even less than 38%.

“There will be some momentum if fares drop, possibly to pre-COVID levels, but this is hardly sustainable given today’s high fuel costs,” he said. “Before the pandemic, domestic earnings were very low and none of Malaysia’s domestic airlines were profitable.”

Teo said the airline will use Kuala Lumpur International Airport as a central hub and serve domestic routes before expanding to international destinations after a year.

A review by the Companies Commission of Malaysia revealed that MYAirline holds 2 million shares at 1 ringgit each, representing a paid-up capital of 2 million ringgit (US$430,000). Private companies Zillion Wealth and Trillion Cove Holdings – both owned by local businessman Goh Hwan Hua – have stakes of 88% and 10% in the airline, respectively. Teo owns the remaining 2% stake.

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According to moneylender Trillion Cove’s website, Goh, who is listed as CEO and director, has more than 20 years of experience managing information technology and application-related companies in Malaysia, Thailand, Singapore and Indonesia. The site said he has been involved in various industries including e-commerce, e-ticketing, fintech, retail and tourism.

Teo said owning a commercial airline had been a longtime dream of Goh.

“He’s asked me about the idea of ​​starting an airline for the last seven years and my answer has always been the same to him that there are many ways to waste your money,” Teo said.

“But in October 2020, when he (Goh) asked again, I thought this was the best time” to start preparations, he added, citing the collapse of the global aviation sector due to travel restrictions and border closures.

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