THE IMPACT OF SHARE SWAP BETWEEN MALAYSIA AIRLINES (MAS) AND AIR ASIA

 Malaysia Airlines (MAS) and AirAsia is competitor to each other in the same operating region. As a business competitor both of the company will try to capture the market before the other one wins it. The competition sometimes is too high until they cannot stand with it and hurt each other. So that, route rationalization is a significant method to reduce the competition and both company must be together to develop economy of the country.

MAS as a national carrier which bring Malaysia flag around the globe must be preserved or supported, so that both company cannot to try to kill each other business although they are competitor to each other. Thus, share swaps being introduced with the intention to relax the competition between two companies. After a while, they consolidate each other in term of business operations. However share swaps does not mean that MAS can interrupt AirAsia business strategy and vice versa, but they are allowed to co-operate in term of the operations. For example, they can do code sharing.

At the same time, MAS which is owned by the Government have to fulfill the Government needs and want, they have to follow any instruction by the Government. Therefore, MAS is carrying more national responsibility rather than its competitor; AirAsia. MAS also carry the burden to fly to unprofitable route as a social service to the nations while AirAsia is freely to focus on their business.

However, this share swap give direct impact to:

Malaysia economical impact

• The cancellation of Firefly’s flight to Sarawak is a step to reduce AirAsia competitivenes level because Firefly as MAS’s subsidiary low cost carrier is a perfect competitor to AirAsia.
• This is not good for our economy, since it will reduce the income as less airlines operates. 
• This share swap had been looking as a monopoly agreement of both parties. This also will cause a major impact on tourism industry of our country. Tourism industry among a major contributor for Malaysia’s GDP.

If we refer to the case happen in Sarawak, where the state try to seek opportunity to offer foreign airlines to operate into Sarawak, this will create another wave to our economic stability. This situation, if not being controlled, will cause major injury to our airlines industry as the number of direct competitor increasing. Increasing number of competitor is not good for our local airlines industry as they have to struggle to be sustain in this industry. 

However some airline analyst state that this share swap give benefit to both parties because share swaps being introduced with the intention to relax the competition between two companies. Both parties will consolidate each other in term of business operations and not try to kill each other. If it true, then it is good for our country because both airlines can focus on their business without so much competition within the domestic and they can divert their attention to foreign airlines. This will stabilize GDP of the country and will strengthen our economy when both airlines consolidating each other for a firm business operations.

The impact to Malaysia Airlines

• MAS seemed the most suffer for this deal. At the initial of the share swap, MAS management structure has been restructure and their personnel being replaced including the Managing Director, Tengku Azmil. 
• There are also changing in MAS operation, for example, MAS terminated its route to Capetown and Buenos Aires happen after the restructuring and share swap.
• For the first 4 month after the share swap shows that MAS experienced loss of RM 1.28billion for the final quarter of the year 2011 and total RM 2.5billion loss after 8 month of the deal. 
• It shows that the deal is not helping the MAS to recover, instead of that MAS keep loss.
• It is also said by the former MAS managing director, that the share swap will not resolve the MAS woes. Under the deal, AirAsia will send its aircraft to MAS for maintenance, this will increase the high operating cost of MAS while it only get the less benefit from the deal comparing to what AirAsia get, it’s not shock if MAS will loss for the next financial quarter.

However, for the chairman of AirAsia Tan Sri Rafidah Aziz, the loss that MAS get has nothing to do with the share swap. She says: “MAS has been making losses from some time back and it is not because of the share swap,”