Take a look at Kuala Lumpur International Airport (KLIA) today and compare it 14 years ago before low cost carriers (LCCs) were introduced in the region. The way people travel today has changed dramatically and for the better. Millions more have now flown as a result of substantially lower air fares as compared to the past where fewer have flown due to very high air fares.
In fact, KLIA’s growth over the past 14 years was contributed by LCCs and not full service carriers (FSCs). LCCs grew at an average rate of 38% or 25.7 million passengers versus FSCs growth at only 3% or 9.0 million passengers. Very recently, LCCs at LCC HUB @ klia2 have begun contributing higher volume of traffic compared to FSCs at the KLIA main terminal building. This is solid proof that low fares create new demand for air travel.
AirAsia has always championed low fares for our guests who would otherwise never have an opportunity to fly or be able to fly more. Between 2012 to 2015, we lowered our average fares by 15% from MYR184 to MYR157 to stimulate the market. Our guests then grabbed this opportunity to travel and the outcome speaks for itself. We saw a sharp increase in the number of guests carried from 19.6 million in 2012 to 24.2 million in 2015!
However, low fares alone is not enough. Airport tax is another component of your full air ticket cost. It ranges from MYR 9 for domestic flights and MYR 32 for international flights at LCC HUB @ klia2. Very often, this airport tax exceeds our zero fares or low fares on offer to many great and exciting destinations. Therefore, we are strongly against any increase in airport tax as our guests ability to fly is greatly reduced or diminished.
A study done by our market intelligence team and subsequently verified by Airbus indicates that on an AirAsia route such as Kuala Lumpur to Singapore, if airport tax increases by 100% (or from MYR 32 to MYR 64), the bottom 20% of the market, that is equivalent to 200,000 round-trip passengers per year, will loose the opportunity to travel. These guests are price elastic travelers who never had the chance to travel in the past but can do so today because of AirAsia’s low fares. The costly air tickets after an increase of airport tax will again deprive their ability to travel by air. This example applies to other routes as well and the total impact across the industry will be very significant.
Therefore, we say keep taxes low at a time when the country needs greater growth in tourism, economic and investment activities.We have come a long way in building an Asian LCC Hub in Malaysia. Let’s work together in driving this message across that low airport taxes is the only way forward.
About Tony Fernandes
Tony Fernandes has over 29 years of experience and has worked with organizations like AirAsia, Warner Music Southeast Asia, Warner Music Southeast Asia, Warner Music Malaysia, Warner Music International & Virgin Communications. Tony holds a Accounting from London School of Economics and Political Science..