The Competition Appeal Tribunal of Malaysia (CATOM) has overturned MYR10 million (USD2.4 million) in fines levied against each of Malaysia Airlines (MH, Kuala Lumpur Int'l) and AirAsia (AK, Kuala Lumpur Int'l) by the Malaysia Competition Commission (MyCC) following a collective appeal.

In 2014, the MyCC found the terms of a 2011 Comprehensive Collaboration Framework (CCF) signed between the carriers had violated section 4(2)(b) of the country's Competition Act 2010. The section deals with the impact of joint-ventures and partnerships on the local markets and on competition.

At the time, the CCF involved an equity swap (which was subsequently unwound) wherein Khazanah Nasional Berhad, Malaysia Airlines' owner, gained a 10% stake in AirAsia while Tune Air, AirAsia's parent, gained a 20.5% stake in Malaysia Airlines.

In addition, the agreement also laid out which carrier could operate where with Malaysia Airlines designated the agreement's only full service carrier while AirAsia and AirAsia X (D7, Kuala Lumpur Int'l) were designated its regional and longhaul low-cost constituents. In line with this section of the CCF, Malaysia Airlines' full-service subsidiary Firefly (FY, Penang) agreed to withdraw from certain domestic Kuala Lumpur Int'l routes - Kuching, Kota Kinabalu, Sandakan, and Sibu - in favour of AirAsia.

The MyCC's subsequent investigation and ruling on the CCF found it had created a quasi-oligopoly for the two carriers and their respective subsidiaries with each market sector carved up and fenced off according to each airline's needs. This, the MyCC said at the time, gave the airlines the power to maximise fares without the threat of competitive forces coming into play.

"The Collaboration Agreement allows both airlines to operate freely within separate market segments and it provides them the freedom to impose higher prices to maximise profitability without any competition. This will eventually leave consumers to face the increased likelihood of higher airfares and fewer choices," the MyCC's original findings said.

On the back of the pecuniary measures imposed by the MyCC, the carriers appealed the ruling to CATOM in 2014.

Last week, a five-man CATOM tribunal announced its findings stating it had reviewed the case and determined that the CCF had not infringed on the Competition Act.

“In our unanimous view, we found there was no infringement of Section 4(2) of the Competition Act,” High Court judge Justice Hasnah Hashim said in a statement.

The MyCC's ruling was overturned with the fines to be repaid to each of Malaysia Airlines and AirAsia.

While both Malaysia Airlines and AirAsia welcomed the outcome, the MyCC has said it will hold internal consultations before deciding on whether to file a judicial review against CATOM’s decision.