AirAsia slams Mavcom over RAB’s ‘punitive elements’

This article first appeared in The Edge Financial Daily, on November 8, 2019.
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KUALA LUMPUR: AirAsia Group Bhd, the largest low-cost carrier (LCC) in Asia, has once again hit out at the Malaysian Aviation Commission (Mavcom), this time over the aviation regulator’s insistence on pushing through what AirAsia claims to be certain punitive elements within its new regulatory asset base (RAB) framework.

“The RAB should be a fair framework if done with the right intention and purpose. Unfortunately, we foresee that cross subsidising between profitable and non-profitable airports will continue under the current RAB proposition,” AirAsia group president of airlines Bo Lingam said in a statement yesterday.

On Oct 23, Mavcom announced that it is in the final stages of completing its RAB framework which forms the basis for funding and developing the airport network in the country.

Malaysia Airports Holdings Bhd (MAHB) was not spared from criticism, either.

Bo pointed to the airport operator’s plans to spend RM5.2 billion from 2020 to 2022, saying a sizeable portion of which will go towards the new baggage handling system and aerotrains at Kuala Lumpur International Airport (KLIA).

“Is it fair to get LCC passengers, who not only are unable to enjoy these expensive facilities at KLIA but forced to put up with inhospitable conditions at klia2, to pay the same passenger service charge (PSC) rates?” he asked.

AirAsia also lamented the lack of engagement between MAHB and airlines in its airport development including its planned interlining between KLIA and klia2.

“We are highly sceptical of its (MAHB’s) capability to efficiently complete this huge amount capital expenditure (capex) in this short period of time. Firstly, there is an absence of a detailed business case to justify each capex. Secondly, MAHB’s historical capex spending of just RM200 million to RM300 million per year does not suggest that it would be able to undertake this size of investment,” said Bo.

“It is Mavcom’s responsibility as a regulator to protect the interest of the flying public by ensuring travellers get what they pay for, but it is clear from its insistence on including this in the RAB that it is oblivious to the mood of the nation. LCCs have around 60% of the airline market share in Malaysia, yet Mavcom refuses to acknowledge the demand for low-cost travel and insists on unfair charges for travellers,” he added.

“We continuously advocate for fair and reasonable charges, be it PSC or Mavcom’s regulatory fee, because we believe that some of these charges have unnecessarily and unfairly increased the cost of travelling, stripping away the chances for the general public to fly.

“Instead of reducing the cost of flying, the RAB championed by Mavcom would, in fact, keep flying out of reach of many, the opposite of what the government is trying to achieve,” Bo said, adding that Mavcom does not seem to share AirAsia’s enthusiasm in supporting the government’s Shared Prosperity Vision.

“Mavcom has consistently stressed on the equalisation of PSC between KLIA and klia2, by virtue of both terminals forming a single KUL. The one fact that Mavcom and MAHB have refused to acknowledge and tried to camouflage all along is the vast difference in both appearance and service levels provided at these two terminals,” he added.