AirAsia Group Bhd is set to take over the Kota Kinabalu (KK)-Sibu and KK-Bintulu routes from MASwings Sdn Bhd starting January 2019 following the Cabinet’s approval last week.

Transport Minister Anthony Loke said the contract with MASwings, the current route operator, which was supposed to end in 2024, would be terminated and this would help the government save between RM10 million and RM20 million for both routes from 2020 onwards.

"We hope this will reduce government subsidies and at the same time reduce airfares and increase flight capacity for both sectors," he told reporters at an AirAsia's event to announce additional late-night flights for the upcoming Chinese New Year, in Sepang today.

The KK-Sibu and KK-Bintulu were among over 30 Rural Air Service (RAS) routes in Sabah and Sarawak managed by MASwings and subsidised by the government as they were deemed non-commercially viable.

Loke said the 2019 Budget proposed an allocation of RM230 million ceiling for the RAS subsidy, which included the compensation for MASwings compared with the subsidy bill of RM190 million this year.

He said the commercialisation of the routes would help the government to gradually reduce the ceiling rate for the subsidy from 2020 onwards.

The government had previously commercialised six RAS routes, namely KK-Tawau, KK-Sandakan, KK-Miri, Kuching-Sibu, Kuching-Bintulu, and Kuching-Miri.

“If MASwings wants to resume flying this route, it will have no problem to continue operating but will not get the subsidies.

"They (AirAsia and MASwings) can compete on the same level playing field (without subsidies)," he said.

Loke said a new Operating Agreement between the government and AirAsia would be signed by year-end to finalise the deal, which would include the compensation amount for MASwings.

He said AirAsia would have a six-year contract ending 2024 to operate the KK-Sibu and KK-Bintulu routes.

Meanwhile, AirAsia will add extra late-night flights to accommodate travel demand on popular routes for the upcoming Chinese New Year period between Jan 30 and Feb 12, 2019.

These include routes to and from Penang, Kuching, Kota Kinabalu, Sibu and Miri.

– Bernama