The Malaysian Aviation Commission Ends Its Assessment of the Individual Exemption Application for the Proposed Joint Business between Malaysia Airlines Berhad and Cathay Pacific Airways Limited
- The Malaysian Aviation Commission (“Commission”) ends its assessment of the individual exemption application (“Application”) for the proposed joint business (“JB”) between Malaysia Airlines Berhad (“MH”) and Cathay Pacific Airways Limited (“CX”) (collectively referred to as the “Parties”) after the Parties notified the Commission that it no longer intends to proceed with the JB on 31 July 2023.
- The Parties had submitted the Application to the Commission pursuant to section 51 of the Malaysian Aviation Commission Act 2015 [Act 771] on 11 May 2022. The Parties’ proposed “metal-neutral” JB is in respect of all scheduled air passenger services between Malaysia and the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”) operated by MH and CX. A metal-neutral JB involves deep cooperation between airlines, where the Parties’ cooperation would include, among others, revenue and cost-sharing, pricing coordination, network planning and schedule coordination, service and product coordination, as well as joint sales and marketing.
- The Commission gave due consideration to the Parties’ submissions and upon deliberation, found that the JB will lead to a significant reduction of competition, particularly in the Kuala Lumpur–Hong Kong market, as the Parties will be jointly dominant in the market. The Parties are each other’s closest competitors on the route and the elimination of competition between the Parties could potentially lead to negative effects to consumers in the form of increased prices or reduced service levels. While the Commission accepts that there are benefits that could arise out of the JB, the Commission found that these benefits would not outweigh the detrimental effects of the JB on competition.
- The Commission informed the Parties of its concerns above via letters on 20 January and 7 March 2023 and provided an opportunity to the Parties to offer undertakings to address the Commission’s concerns.
- The Parties responded to the Commission via several letters and submissions between February and July 2023 and provided proposed undertakings for the Commission’s consideration. The Commission and the Parties were not able to come to an agreement on undertakings that would adequately address the Commission’s concerns.
- The Commission had also conducted engagements with third parties throughout the course of its assessment, including seeking further feedback from the Parties’ competitors in the Malaysia–Hong Kong market.
- In view of the Parties’ notification to the Commission of their decision to not proceed with the JB, the Commission ends its assessment of the Application and closes the matter.