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Malaysia Airlines (MAS) fired the first salvo yesterday with its offer of $172 nett for a round-trip fare - $89 out of Singapore and RM199 (S$83) out of KL.
Singapore Airlines (SIA) will release tickets at $293 next week, the airline told The Straits Times.
The discounted fares are sharply below the round-trip charges of more than $400 when the two carriers had a virtual monopoly of the market before February.
Their new fares add to several other promotions and deals offered by Singapore's Tiger Airways and Jetstar Asia, as well as Malaysia's AirAsia.
The low-cost airlines entered the Singapore-KL market in February with restrictions on the number of flights they can operate, but are boosting capacity from Dec 1.
Their return Singapore-KL fares range from as low as $60 to more than $150, depending on time of travel and availability.
While the price war is good news for consumers, industry observers note that the deals suggest airlines could be worried about too many seats flooding the market.
From Dec 1, travellers can choose from 29 return flights a day - about 10 more than the number available now.
SIA, SilkAir and MAS will run 15 services while the three low-cost carriers will do up to 14 a day.
Ms Louisa Chin, senior marketing and communications manager at ASA Holidays, said: 'It is definitely unusual for airlines to cut fares during peak season. That they are doing it shows how very competitive the market is.'
MAS senior general manager for sales Bernard Francis admitted that it will be a challenge to keep the aircraft full.
'We believe in liberalisation, but filling up four million seats a year can be very challenging. If we do not do anything, we will lose money on the sector,' he said.
The airline decided to cut fares by more than 60 per cent to stimulate demand and encourage more travellers to choose MAS, he said.
The airline is also offering an $89 one-way deal for flights out of Singapore to Penang, Langkawi, Kota Kinabalu and Kuching.
Tiger, Jetstar and AirAsia will start flying between Singapore and Sabah and Sarawak from later this month.
Jetstar's head of sales and distribution, Mr Leslie Ng, believes that cheaper air tickets will encourage more express bus travellers to fly.
'Travellers now have an alternative to avoid the traffic snarl at the two points of entry into Malaysia,' he said.
The airline hopes to fill an average of more than eight out of 10 seats on the Singapore-KL route this month.
SilkAir chief executive officer Chin Yau Seng is similarly optimistic.
The airline entered the Singapore-KL market three weeks ago, taking over some SIA flights, and has seen good traffic so far.
Mr Chin said: 'Our morning flight which leaves at 7.10am is chock-a-bloc and loads on the evening flight out of KL are also getting stronger.'
The full-service airlines also have an advantage over the low-cost carriers because anyone with an SIA ticket can also fly on SilkAir or MAS, thanks to a code-share agreement between them.
Liberalisation on the Singapore-KL sector is a reality today because the Singapore and Malaysia governments agreed in November last year to lift all restrictions on the route as part of a wider move to liberalise the skies above Asean.
