The much-awaited budget flights between Singapore and Kuala Lumpur started yesterday, ending a decades-old duopoly of the lucrative route by the countries' flag carriers.
The move will likely increase passenger traffic on the air corridor - already Asia's fourth-busiest - and spur other Southeast Asian nations to speed up efforts to liberalize the region's air services, analysts say.
About 200 passengers on AK123 - no-frills airline AirAsia's first flight to Singapore from Kuala Lumpur - were greeted at Changi Airport's Terminal 1 yesterday with a traditional Chinese lion-dance performance, accompanied by booming drums and crashing cymbals.
"This is a very, very important day in Asian liberalization," said AirAsia Chief Executive Tony Fernandes, who like many others on the 50-minute flight was wearing a red AirAsia T-shirt that said: "Finally!"
"It will change the way countries look at route rights, and there will be much more liberalization going forward," he said.
The Center for Asia Pacific Aviation said in a report yesterday that low-cost carriers seeking new routes to grow their businesses were increasingly acting as catalysts for greater liberalization in the region.
"Asian aviation has shifted irreversibly into a new era of liberalization" with the opening of the Singapore-Kuala Lumpur route, the report said.
Until now, Singapore Airlines Ltd and Malaysia Airlines had controlled the route under a 34-year-old agreement to protect the two state-run carriers. Last year, their governments agreed to allow budget carriers from both countries to operate a total of four daily flights between the two cities starting this month.
The airlines carried about 1.7 million passengers between the two cities last year, according to figures provided by the Civil Aviation Authority of Singapore.
Fernandes said he believed the route has been underserved, and that there could be more than four times as many passengers.
"I think eight million passengers could be achieved within four to five years," he said.
Kuala Lumpur-based AirAsia is flying twice daily, while Singapore-based budget airlines Tiger Airways and Jester Asia are each operating one daily service. All three carriers started services yesterday with promotional fares, with some giving seats away.
"Finally ... we have been waiting for this for years," said Ricky Wong, 38, a Malaysian who flies between the two cities every three months or so for leisure. "It's good to have competition, just like in a department store."
AirAsia's regular fares are expected to be about 150 ringgit (US$45) for a one-way ticket, about 60 percent cheaper than that charged by the national carriers.
Standard & Poor's Equity Research analyst Shukor Yusof said Malaysia Airlines is likely to be more affected by the budget carriers' entry into the market because the route accounts for 15 percent of its revenue, compared to three percent for Singapore Airlines.
The Malaysian carrier said on Thursday the financial impact of the route's partial opening on its business would be limited while Singapore Airlines said it would compete on the route in the same way it does on any other.
"As an airline which believes in liberalization, we have no concerns with opening the Singapore-Kuala Lumpur route. In this way, it will function now in the same way as any other airline route," said Singapore Airlines spokesman Stephen Forshaw.
Malaysia and Singapore aim to fully liberalize air travel between the two countries by December, together with other members of the Association of Southeast Asian Nations.
In November, the group's transport officials moved a step closer to implementing a roadmap that will allow all regional airlines to operate unlimited services on routes between their capital cities in 2008.
(Shanghai Daily February 3, 2008)