PSC remains uneven despite rate equalisation

This article first appeared in The Edge Malaysia Weekly, on April 16, 2018 - April 22, 2018.
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BEGINNING Jan 1, international passengers departing at all Malaysian airports were supposed to pay the same passenger service charges (PSC) under a rate equalisation exercise. However, a closer examination reveals some travellers are still paying less than others.

Online checks on airline websites show that some international passengers flying out of klia2 appear to still enjoy the previous rate.

Airport operator Malaysia Airports Holdings Bhd (MAHB) was brief in its response when contacted by The Edge for an explanation: “While Mavcom (Malaysian Aviation Commission) has regulated the revised PSC rates, which includes RM73 for non-Asean international passengers, the implementation has been deferred until further notice.”

For a one-way Malaysia Airlines flight from the Kuala Lumpur International Airport main terminal (KLIA) to Perth on April 30, a passenger is charged a PSC of RM73.

Likewise, Malindo Air also collects RM73 PSC for a flight to Perth on April 30.

On the other hand, online checks by The Edge show an AirAsia flight to the same destination on the same day is levied a PSC of RM50 only.

AirAsia declined to comment for this story.

Malaysia Airlines said via email that it is collecting the newly gazetted rate and is unable to comment on why other airlines may not be doing the same.

The equalised rates were gazetted in December to take effect from Jan 1. The latest revision beginning this year was aimed at equalising the PSC level for international departures from klia2 with the other Malaysian airports, which had already been at RM73.

It was the second revision following the first round of PSC adjustments announced by Mavcom on Oct 31, 2016.

That first revision had equalised the PSC for domestic departures and reduced the PSC disparity between international departures at klia2 and those from other local airports.

Checks for domestic flights found that all three major domestic carriers — Malaysia Airlines, Malindo Air and AirAsia — are now charging RM11 as per the current PSC rate.

The deferment in respect of international PSC does not seem to be exclusive to AirAsia as online checks reveal other airlines flying out of klia2 are also not collecting the full RM73 from international-bound passengers.

Cebu Pacific Air, for example, collects RM35 in PSC from flyers heading to Sydney on April 30. Likewise, Jetstar charges RM35 for those booking a flight to Sydney on April 29.

It could not be immediately confirmed if the airlines charging less than RM73 are subsidising the difference when the collection is forwarded to MAHB.

The PSC equalisation had been a contentious issue. Some airlines based at klia2, including AirAsia — its main tenant — had argued that the equalisation is unfair, given the lower quality of facilities and services available at the terminal in comparison to KLIA.

On the other hand, other airlines had argued that the different pricing in the past had created an unfair competitive landscape.

In a statement last December, the International Air Transport Association — of which AirAsia is not a member — lauded the equalisation as creating a level playing field.

Meanwhile, if MAHB is receiving less than RM73 per international departure for some passengers passing through its airports, it amounts to lost revenue for the airport operator.

Based on the latest traffic figures released by MAHB, the international passengers segment is growing faster at klia2 than at KLIA.

In the first quarter of 2018 (1Q2018), KLIA saw 5.66 million international passengers, a 7.1% expansion year on year. From that figure, 3.52 million were bound for non-Asean destinations, 7.5% higher than 1Q2017.

In comparison, klia2 recorded 5.38 million international passengers in 1Q2018, up 10.7% y-o-y. Some 44.2% of that volume, or 2.38 million travellers, were heading to non-Asean destinations — a 10.8% increase from 1Q2017.

In an April 11 note, Nomura Research forecast that for 2018, overall, MAHB is likely to see non-Asean international passengers at klia2 rise 8.5% y-o-y to 9.62 million.

Assuming 2.38 million international passengers only paid RM50 in PSC instead of RM73, the estimated forgone revenue would be RM54.74 million in the first quarter alone.

Following the same calculations and based on Nomura Research’s full-year estimates, MAHB could be looking at RM221.2 million in forgone revenue owing to the RM23 differential in PSC collected for international departures out of klia2.

MAHB’s first-quarter financials are historically released at end-April.

For the financial year ended Dec 31, 2017 (FY2017), MAHB reported revenue of RM4.65 billion, an increase of 11.5% y-o-y. Net profit surged to RM237.1 million from RM73.17 million the year prior.

MAHB has proposed a dividend per share of eight sen for FY2017, subject to shareholders’ approval, at its upcoming annual general meeting scheduled for May 8.

Most analysts tracking MAHB are bullish on the stock, with 11 “buy” calls against seven “hold” and three “sell”.

Among the “buy” calls, JP Morgan has the highest target price of RM12.40 while Nomura Research’s is RM10.90.

MAHB closed at RM9.12 last Friday for a market capitalisation of RM15.16 billion.

The stock is up 3.75% year to date and trading close to its last peak of RM9.28 in early June 2017, when it chalked an all-time high, based on Bloomberg data.

 

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