(AFP) Malaysia Airlines today defended the suspension of a program regulating airfares after the terror attacks on the US, saying the move would not spark a price war among carriers.

The flag carrier, which heads the Market Development Program (MDP) committee, said the suspension of the MDP pact from November 12 would help its 25 airline members stay competitive amid the economic gloom.

The MDP is a pact between 25 airlines operating in Malaysia, except Singapore Airlines. It was enforced in April 1983 to regulate and stabilise market fares, especially during periods of high demand.

Domestic services in Malaysia, Singapore and Brunei are not covered by the pact.

"The September 11 incident inevitably rendered the MDP untenable and a hindrance to induce travel, which now remains at the lowest confidence level," Malaysia Airlines said in a statement.

It said the temporary suspension of the MDP was "natural and was unanimously concurred and endorsed by all members" to allow each carrier to align supply with demand, and adjust its pricing appropriately.

"The decision to temporarily suspend the MDP was not done with a view to precipitating a price war," it said.

"Rather it will provide each carrier the flexibility to price its product in accordance with market demand. The suspension will allow all MDP carriers to remain competitive with non-MDP carriers, who had not been constrained by the MDP thus far."

Price war fears

Travel agents have said international airfares out of Malaysia could fall by as much as half following the suspension of the MDP.

But they fear the move could spark a price war and hit plans to make the Kuala Lumpur International Airport a regional aviation hub if airlines find it no longer viable to fly here.

Analysts said it was doubtful if the move would significantly boost business for Malaysia Airlines, which had announced it would axe 12 international routes and increase flights in Asia.

The airline, which was renationalised by the government in February, has debts totalling more than 10 billion ringgit (2.63 billion dollars).