The aviation sector has played an important role in developing the economy of

Malaysia. The sector has helped in stimulating other sectors of the economy like
tourism, hospitality, and trade. In the last decade, the Malaysian aviation industry went
through a period of strong growth, with the passenger traffic at both domestic and
international terminals recording high growth rates. Malaysia was the 18th-largest civil
aviation market in the world in terms of air passenger traffic as of 2012. During the last
five years, the passenger traffic growth in the country was higher than the average rates
for East Asia, South Asia, and the world.

In Malaysia, airlines are separated into two; 1) Passenger airlines and 2) Cargo airlines. The
passenger airlines in Malaysia are Air Asia, Malaysia Airline System Berhad (MAS), Firefly
which is owned by MAS, Layang-Layang Aerospace which is based in Sabah to provide air
services to Layang-Layang Island, Berjaya Air which is owned by Berjaya Group, Sabah Air and
last but not least Hornbill Skyways which is a helicopter service that operates in the rural area of
Sarawak. Other than passenger airlines, there are also three cargo airlines that operate in
Malaysia. They are the Athena Air services, MAS cargo and Transmile Air Services. Despite the
various kinds of air operators, the airline industry in Malaysia is being monopolized by two main
operators.
The first one is the Malaysia Airline System Berhad (MAS), which is Malaysias full service
national carrier that first took the skies in 1947 under the name of Malayan Airways Limited. It
was formed through a joint initiative of the Ocean Steamship Company of Liverpool, Straits
Steamship of Singapore and also Imperial Airways. With a team of young and dynamic people,
the domestic carrier turned into an international airline in less than a decade and the name MAS
was only fully incorporated in 1973 after going through numerous mergers and separations. As
of today, MAS flew nearly 50 000 passengers daily to 100 destinations worldwide. The carrier is

a national identity to Malaysia and also a proud one as it had been awarded as the Worlds Best
Cabin Crew in 2001 until 2004 and 2009, and the 5 STAR Airline award from 2005 till 2009
by Skytrax UK. MAS currently have 90 aircrafts for domestic and international flight. There are
currently 20 Airbus and 70 Boeing. MAS main base is at Kuala Lumpur International Airport
(KLIA).
The other airline operator in Malaysia is Air Asia which takes on the low-cost budget airline
business model and is the leading budget airline in Asia. Air Asia has been expanding rapidly
since 2001 and flies to 61 destinations operating 400 flights daily using its 75 aircrafts that it has.
To date, it has flown over 55 million passengers across the region and continues to create more
extensive route network through its associate companies. In the second quarter of 2009, Air Asia
has a capacity growth of 22% (YoY) due to increased number of routes flight frequencies and
passenger growth of 24% (YoY) or 9 005 828 seats in total as at 11 August 2009 (Graph 1). This
is due to its low fare structure making Air Asia the number one choice as opposed to MAS. With
its vision to be the largest low cost budget airline in Asia and serving the 3 billion people who
are currently underserved with poor connectivity and high fares, Air Asia had also made the
nation proud. It was recently awarded the Best Low Cost Airline award by the Skytrax UK and
has started to serve long haul flights to the United Kingdom under its associate company Air
Asia X. Air Asia believes in serving the best to its customers with no frills, hassle-free and low
fare business concept and under its philosophy Now Everyone Can Fly. Air Asia has sparked a
revolution in the airline industry with more and more people around the world choosing Air Asia
as their preferred choice of transport giving greater competition to MAS in terms of monetary
value. Air Asia has more than 50 aircrafts for their flights. There are currently 45 Airbus and 9
Boeing. Air Asia main base is at Low Cost Carrier Terminal (LCCT) and Kuala Lumpur
International Airport (KLIA).

Despite the tough competition that the two airline operators of Malaysia persists, both MAS and
Air Asia managed to overcome the global economic downturn that the world economy is
currently experiencing and recorded RM180 million and RM203 million in net income for the
first half of 2009 which is better than the industrys market average (Graph 2).

Air Asia has been expanding rapidly since 2001 and flies to 61 destinations operating 400 flights
daily using its 75 aircrafts that it has. To date, it has flown over 55 million passengers across the
region and continues to create more extensive route network through its associate companies
It was recently awarded the Best Low Cost Airline award by the Skytrax UK and has started to
serve long haul flights to the United Kingdom under its associate company Air Asia X.

AirAsia Berhad (MYX: 5099) is a Malaysian low-cost airline headquartered

near Kuala Lumpur, Malaysia, operating both domestic and international
flights to 100 destinations crossing 22 countries. Its main hub is klia2 at the
Kuala Lumpur International Airport (KLIA). Its subsidiary, AirAsia X focuses
on long-haul routes. AirAsia's registered office is in Petaling Jaya, Selangor
while its head office is at Kuala Lumpur International Airport.

The outlook for Malaysian aviation is positive and the development movement in
passenger traffic is projected to last in the coming years. The progress will be driven by
an upsurge in domestic as well as in international tourism, the increasing popularity of
Malaysia as an Asian travel hub, the growing importance of Kuala Lumpur as an
international financial center, and the surge in the per capita income.