4PAM president Ajit Johl said it was “a bit scary” that the government was subsidising private businesses, especially as price structures were not transparent and return fares were unknown, giving airlines “free money” to do business.
“There should be transparency in the pricing mechanism as it involves public funds,” he said, adding that ticket prices tended to be based on demand.
Commenting on the transport ministry’s recent announcement that one-way economy class tickets from the peninsula to Sabah, Sarawak and Labuan would be capped at RM599 for festive seasons from Christmas onwards, Ajit said there should be a transparent costing structure and mechanism.
He added that a committee on pricing should be set up, and that the government should not accept “whatever price” the airlines gave.
Nevertheless, Ajit called the initiative a good idea, although it required more detailed information.
He also called for a further reduction in fares as RM599 was high for a one-way ticket, considering that passenger service charges and air fuel surcharges were separately priced.
He cautioned that such policies were difficult to remove once set, and also challenging to maintain in the long-term.
MDS Consultancy Group managing director Rosli Khan said flights between the peninsula and Sabah and Sarawak were unique from the social services standpoint, as there were no other public means of transport between these regions.
He claimed that in the absence of tight regulations such as an airfare capping policy, operators had in the past taken advantage of high-demand situations.
He said many passengers had been victims of operators’ greed, adding that he once paid more than RM3,000 for a one-way economy flight to Kota Kinabalu.
“It is important and critical for the government to have an airfare-capping policy at all times,” he said, adding that this should be all year round and not just for seasonal holidays.
Low profit margins
Meanwhile, Imperial College London’s Centre for Transport Studies research associate Roger Teoh said festive season price increases were a result of demand significantly outstripping supply, which in this case was aircraft seat capacity.
According to the International Air Transport Association, the global average net profit margin for airlines is only 2.7%, which is very low relative to other industries.
“Putting this into perspective, the net profit margin is far below the cost of capital (around 7%) and below what investors in almost any other industry would accept,” he told FMT.
Four days ago, transport minister Loke Siew Fook said the subsidy framework would be extended to other festivities such as Chinese New Year, Hari Raya Aidilfitri, Kaamatan and Gawai from next year as well.
Participating airlines include AirAsia, Firefly, Malaysia Airlines and Batik Air.