MAS gets nod to hike domestic airfares by 51.8%

Asian Economic News, July 23, 2001

KUALA LUMPUR, July 18 Kyodo

Malaysia's national air carrier, Malaysian Airlines System Bhd.(MAS) finally received the green light from the government Wednesday to hike its domestic air fares by 51.8%, effective immediately.

''I believe the increase is reasonable. The last hike was nine years ago and it ranged from 15% to 20%,'' Transport Minister Ling Liong Sik was quoted saying by the New Straits Times in its Internet edition.

Ling said that since then, fuel prices, operating expenditures and cost of aircraft had gone up and MAS ''could be running at a loss for a prolonged period.''

Despite the fare hike, he said MAS fares would still be the cheapest in the region.

At present, MAS charges an average of 32.5 sen (100 sen equal 1 ringgit or $0.26) per kilometer. With the increase, it averages about 49 sen per km.

Comparatively, according to Ling, Thai domestic airfares average 40.6 sen per km, China 51.3 sen, the Philippines 52.5 sen, India, 71.8 sen, Indonesia, 95.6 sen and Japan, 126.3 sen.

The fare increase, however, is only for flights within Peninsular Malaysia.

There will be no change for flights from the peninsula to Sabah and Sarawak, the two Malaysian states on Borneo, or within the two Borneo states.

Sabah and Sarawak are the least developed states in the country and, due to poor infrastructure, still have to rely on airplanes for much of the local transportation.

Ling said the government would continue to subsidize rural air services in the two states ''in the interest of national integration.''

As for international flights, Ling said the fares are determined by market forces.

MAS needs government approval for any review of its domestic flights.

The airline, which has not seen a profit in the last four years, sought to increase its fares two months ago as part of an overall restructuring strategy to return to the black.

MAS incurred a net loss of 1.33 billion ringgit last year, five times that of the previous year, and it still has debt totaling 9.1 billion ringgit.