Low airfares seen with suspension of pricing mechanism


  • Business
  • Wednesday, 09 Apr 2003

BY B.K. SIDHU

The Market Development Programme (MDP), which sets the minimum airfares, would be suspended for a three-month period to allow signatory airlines to set their own airfares and promote low fares. 

This will provide airlines with the flexibility to respond to the downturn in the industry caused mainly by the outbreak of SARS (Severe Acute Respiratory Syndrome) in several Asian countries. 

According to Ronald Chan, a member of the MDP/MATTA steering committee, the suspension comes into effect next Monday. . MATTA is abbreviation for Malaysian Association of Travel and Tour Agents. 

“We are allowing more flexibility for airlines and travel agents to market their products since there is a slump in air travel,'' said Chan, who is also executive director of Excellence Holidays Sdn Bhd. 

There are 26 airline and 475 agent signatories to the MDP, introduced in April 1983 under the auspices of the Board of Airline Representatives Malaysia to regulate and stabilise fares, especially during periods of high demand.  

Ronald Chan

Malaysia Airlines is a signatory, but Singapore Airlines had opted out since 1997. 

It is believed that letters advising signatories and travel agents of the suspension were despatched yesterday. This followed a meeting among the MDP members on Monday to decide on the suspension. 

The air travel market would be monitored closely, and after the three-month period, MDP members would review the situation.  

”In a weak market and in times like these it is better to allow market forces to determine prices,” an industry source said. “What is the point of having rules when the planes cannot be filled?'' 

“We need to reduce prices further as airlines cannot keep on flying with half-filled planes. Many people have postponed their trips to the countries badly affected by SARS and others are against travelling until they get more details on the illness,'' another source said. 

A representative of an airline which is an MDP signatory said airfares were already low, and that the issue really was the “fear factor'' of SARS. “The fear is so great that people would rather wait for developments before deciding on a date to travel.'' 

This is not the first time that the MDP agreement has been suspended. The Sept 11 terror attacks on the US resulted in the agreement being suspended for about a year. It was reinstated on Sept 15, 2002, after three postponements.  

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