KUCHING: Sarawak’s new boutique airline plans to focus on long-term benefits to the state has led to concerns about its profitability.
According to Universiti Malaysia Sarawak (UNIMAS) economist Jerome Kueh, setting up an airline poses various challenges including regulatory compliance, financial stability and market accessibility.
However he acknowledged the government’s crucial role in providing the necessary infrastructure or mediums to stimulate economic development, such as establishing its own airline.
“The government can capitalise on the vast opportunities in the tourism industry, as Sarawak boasts rich biodiversity in nature and a diverse mix of cultures,” Kueh said.
He also highlighted the state government’s ability to make swift decisions regarding international flight destinations and improved local flight connectivity, which may address the issue of high air travel costs for Sarawakians, particularly during holiday seasons.
Universiti Teknologi MARA (UiTM) Sabah economist Firdausi Suffian said that the state having its own airline can be a positive move, potentially addressing the rising cost of airfares and providing an alternative option in the airline market.
“This is good news for the people of Sarawak and even the wider Borneo region,” Firdausi said, adding that the airline may improve connectivity in the region, especially with the upcoming relocation of the capital city of Jakarta.
Despite the recent budget surplus of RM238 million, maintaining the airline may strain the state’s finances. A successful airline business requires careful planning and strategy to remain competitive and generate economic benefits such as job creation and production network links.
Centre for Market Education (CME) economist Carmelo Ferlito cautioned against the misconception that abandoning profit logic can better support consumers.
“The misconception is that one must forsake the logic of profit in order to support consumers, but this is, unfortunately, an illogical notion.” Ferlito said.
He added that in a competitive market, profit expectations incentivise more suppliers to provide goods and services, gradually bringing down prices.
A lack of profit could compromise the quality of services, which could be particularly dangerous in the airline industry.
Recently, Premier Datuk Patinggi Abang Johari Tun Openg reiterated that Sarawak’s boutique airline will not be profit motivated. Its set up will be based on its own unique model without following either Malaysia Airlines or AirAsia.
