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Can AirAsia Berhad Survive The Latest Storm?

AirAsia Berhad’s (KLSE:5099.KL) co-founder and chief executive, Tan Sri Tony Fernandes, has always been vocal about the things that are hindering the growth of his business.

Over the past decade, it has mostly been about the challenging relationship AirAsia had with its partner, airport operator Malaysia Airports Holdings Berhad (KLSE:5014.KL).

But even as the relationship between the two companies are improving, a new problem has emerged for AirAsia Berhad. This time, the antagonist is Malaysia’s Department of Civil Aviation (DCA). Last week, DCA proposed to raise fees for many services and items that are under its purview; at least one of the fee hikes to be borne by the airlines is up to 10 times the current rate.

The sudden change by the DCA has prompted Tan Sri Fernandes into action. AirAsia’s leader has suggested that all airlines in Malaysia should form an association to discuss issues with air travel regulators in the country.

It seems that other airlines in Malaysia have heeded Tan Sri Fernandes’ call. According to a recent twitter post by him, the Association of Malaysia Air Carriers (AMAC) has been formed.

The current fee-hikes proposal by the DCA can lead to higher costs for Malaysia-based airlines, including AirAsia. It might even impact the competitiveness of the tourism industry in Malaysia. Given that the tourism sector contributed 15% to the country’s economy in 2014, the AMAC may have some firepower in its arsenal to oppose the fee-hike plans.

Foolish Summary

It might be too early to know if AirAsia will be successful in spearheading a change of heart in the DCA regarding its latest proposal to raise fees. But one thing’s for sure – the airlines in Malaysia are not taking things lying down with the formation of the AMAC, the first airlines association in Malaysia.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns shares in AirAsia Berhad.