Ah, the smell of deregulation in October. The news has finally broken that Air Asia, who has long sought to break into the KL to Singapore air route, will finally get its wish soon as Malaysian officials gave the green light for 2 flights a day, as well as flights to be operated by a Singaporean budget carrier (it's almost a sure bet that that will be Tiger Airways).

Competition for consumers is good, it drives companies to perform better and offer quality products and services priced competitively. SQ and MH have long held an almost absolute monopoly on this route for years, and prices have been sky high. A recent check of a weekend roundtrip flight to Kuala Lumpur came in at S$436. Air Asia will undoubtedly bring that price down, possibly as low as $60 each way (Tony Fernandes, Air Asia CEO has alluded to the price being as low as this amount).

What you will see then is a race to the bottom. Whether or not SQ or MH price their flights as low as Air Asia remains to be seen, but if it is any indication of how an LCC moving on to a highly lucrative route works out for the major carriers, look at the United States. In the markets that Southwest Airlines operates, prices have come down, and quite often on the exact same routes, Southwest is the same price as United Airlines or American Airlines.

Lower prices will ultimately mean thinner margins for MH and SQ. But there is some good news here on the business side of things. SQ owns 49% of Tiger Airways, so at least all is not lost.

What this ultimately means for you? Well, cheaper prices and fares for starters. For the airlines, and their bottom line, thinning margins as things become tighter. This particularly holds true in the United States but not so much here in Asia. We'll wait until the flights take off to see just exactly what happens.

-Curtis Bergh

Labels: Kuala Lumpur, Malaysia Airlines, Singapore Airlines, Tiger Airways