Airlines amid fuel price hike

[This is a serious, business-oriented post.]

As oil price soars, which airline, do you think, will fare better, MAS or AirAsia?

MAS is a ‘full fare’ airline. AirAsia is a no-frills, budget airline. At first, I thought budget airlines would weather the storm better, as passengers cut back on their spending. However, a market analyst is more pessimistic with regard to AirAsia. His rationale is that AirAsia depends on leisure and budget travelers who are price-sensitive.

In other words, leisure travelers will cancel their plans or choose nearer destinations. Business travelers, who make up bulk of the passengers of MAS, will find it more difficult to make adjustment. Furthermore, business travelers usually can’t book their flights months in advance, so there is not much saving should they choose AirAsia.

Of course, not all of MAS's passengers are business travelers. Some leisure travelers who originally plan to fly to Europe may, due to high fuel surcharge, choose nearer destinations in South-east Asia or China. This is where we see the battles of the two airlines.

Tony Fernandes remains combative, but he may have had many sleepless nights by now. If you hold the shares of MAS or AirAsia, you may have sleepless nights too.