AirAsia and Malaysia Airlines declining yields point to challenges as competition intensifies

AirAsia has reported increases in operating profits for its three main short-haul subsidiaries in Malaysia, Thailand and Indonesia. But the Malaysian and Thai carriers saw yields decline while Indonesia AirAsia saw its operating margin drop.

The group continues to find the going tough in the Philippines, where its affiliate incurred another large loss in 2Q2013, and sister long-haul carrier AirAsia X was also in the red. Following the setback in Japan, where AirAsia has dissolved its affiliate, and with the challenges confronting the group in India, where it plans to launch its newest affiliate in 4Q2013, the group needs the older carriers in its portfolio to perform well.

But while AirAsia, AirAsia X, Indonesia AirAsia and Thai AirAsia continue to outperform most of its rivals, competition is intensifying across all of its markets. Malindo has launched in Malaysia, Indonesia AirAsia is battling three other LCCs and Thailand could see two new low-cost competitors emerge in 2014.

This first part of a two-part series of reports looks at AirAsia's position in the Malaysian market. The second part will look at its other home markets.