The Disruptive Environment of The ASEAN Aviation Industry in The Post ASEAN Single Aviation Market (ASAM): The Malaysian Perspective

Abstract

The deregulation introduced by the proposed ASEAN Single Aviation Market (ASAM), posed a great challenges to the aviation industry in the region. The industry will need to face the most challenging environment ever. This is even more challenging than during the deregulation era that allowed the introduction of the low cost carrier in the early 2000. The airlines operating in the region will have to totally change to match the new rules of the new playing field. It is so disruptive in nature that those failing to change and adapt to the new challenges, their survival will be at stake. The decreasing yield due to massive competition from the lower entry barrier, low cost new player will make survival be difficult. The uncontrolled new capacity offered by these new competitors will quickly surpassed the growth in demand, creating great difficulty to existing player in achieving their level of profitability. The new travel demand for newer routes will not be viable to the existing players with the current fleet type that they operated. This study is intended to assess the aviation industry in the region and identify a strategy for surviving in the post ASAM era. An analysis of a sample market from the region, in this case the Malaysian market, was conducted. The market is analysed from the perspective of its current nature of demand, in term of sizes and stage length. This is then followed by benchmarking this nature of demand to the two more advance market of the industry, the US market and the European market. These markets were chosen for the same deregulation fate it has been through. Analyses on the post deregulation industry structure of both of these markets were then used as the benchmark for the sample market comparison. The viability of the benchmark structure in the sample market is further analysed using the Design to Market Index (DM Index ?). The analysis findings lead to a conclusion on the proposed new structure for the airlines industry in the ASEAN region.