KUALA LUMPUR: The aviation industry is mostly positive on the Malaysian Aviation Commission’s (Mavcom) announcement of the revision to the passenger service charge (PSC) for Malaysian airports, as the streamlined rates level the playing field among operators in Kuala Lumpur International Airport (KLIA) and klia2.
Mavcom yesterday announced the revised PSC rates — effective Jan 1, 2017 — which included lower charges for flights to Asean destinations.
AirAsia group chief executive officer (CEO) Tan Sri Tony Fernandes lauded the changes to the PSC, but said that much more needs to be done.
“The acceptance that low charges is what Malaysia needs is historical for me and din (Datuk Kamarudin Meranun). Much more work to be done. But huge step forward,” he wrote on Twitter.
Later in the day, AirAsia Bhd and AirAsia X Bhd released a joint statement registering the group’s “sincere appreciation to Mavcom for its recognition towards low-cost travel and the need to maintain low charges to stimulate traffic growth” but stressed that the facilities that are provided at KLIA and klia2 are not on par with each other.
“In terms of equalisation, AirAsia and AirAsia X passengers deserve the same user experience at KLIA, and before charges can be equalised, the facilities at the two airports should be made equal to each other,” the companies said.
“Otherwise, we are happy to consider moving AirAsia and AirAsia X operations to KLIA to ensure that the [people] receive the value of what they pay for.
“The customers at KLIA enjoy far superior services whereas the services at klia2 are not entirely satisfactory, which do not give rise to a level playing field,” the statement read.
Additionally, the airlines are concerned over the new international rate as international passengers, especially those from China, would now have to pay double the PSC rate at their hub in Kota Kinabalu, Sabah.
“This may decrease the number of international tourists and eventually force us to put the capacity elsewhere,” they said.
“We have repeatedly voiced out that it is important to let tourist numbers return to previous highs before talking about increasing passenger service charges and we are pleased to know that our voices and opinions are being heard and considered,” they said.
Budget carrier AirAsia is the biggest user of the low-cost carrier terminal (LCCT) at klia2, making up 98% of the traffic volume there.
Meanwhile, airport operator Malaysia Airports Holdings Bhd (MAHB) said it will give its cooperation to implement the PSC as regulated and noted that while there is still a differentiation between KLIA and klia2 for international PSC at RM73 and RM50 respectively, it welcomed the move by the authorities as a “first step towards the equalisation of PSC for all airports and terminals, in line with worldwide common industry practice”.
“With the equalisation for the Asean PSC for all airports in Malaysia, we hope this will stimulate a much higher Asean traffic growth into Malaysia thus benefiting the country,” it said.
MAHB added that it will not see material financial benefit to itself as the increase in international and domestic PSC is counterbalanced by the reduction in the Asean
PSC across all airports.
It noted that in 2015, Asean traffic constituted almost 50% of its international traffic.
Malaysia Airlines Bhd CEO Peter Bellew said the streamlining of the rates would be positive for Malaysia Airlines, considering that the national airline operates at the main KLIA terminal.
“The revision is good news for Malaysia Airlines as it brings down costs for Asean routes. It has been difficult for us to compete on the Asean routes due to the rate differential between KLIA and klia2, so the revised rates level the playing field,” he told The Edge Financial Daily over the phone.
While the International Air Transport Association (IATA) welcomed the equalisation, it saw the move as “taking a half step forward” as it was not done for all segments of PSC at KLIA.
“Nonetheless, we look forward to Mavcom’s commitment to equalise the PSC between KLIA and klia2 in 2018. We will work closely with MAHB towards achieving these goals.
“The revision in the PSC will also see some cost increase. The overall aim should be to minimise air travel costs for Malaysia so as to reap the full social and economic benefits of aviation,” said the association.
IATA added that having an independent regulator is critical to effective regulation of airport charges and urged that Mavcom’s independence and freedom in decision-making are maintained.
Mavcom yesterday announced that the PSC for domestic flights will be fixed higher at RM11 for all airports, from the previous rates of RM6 for klia2 and RM9 for KLIA and other airports.
Rates for Asean destinations are now set at RM35, compared previously with RM65 for KLIA, RM32 for klia2 and RM65 or RM26 for other airports.
Meanwhile, rates for international destinations excluding Asean countries were increased to RM73 for KLIA and other airports, while PSC for klia2 was set at RM50. Previously, the rates for KLIA, klia2 and other airports were RM65, RM32 and RM65 respectively.
“Prior to today’s (yesterday) revision, the PSC applicable to Asean destinations from KLIA, Penang, Kota Kinabalu, Kuching, Langkawi and Johor Baru was RM65, being equal to the PSC applicable to flights to all international destinations.
“Malaysia is the first country in Asean to introduce an Asean PSC tier and it is anticipated that this will further boost traffic to and from Asean nations,” said Mavcom, adding that the move is in line with the Asean Single Aviation Market, which aims to create a unified and single aviation market among Asean countries.
Moreover, the commission highlighted that klia2’s PSC rates had been lower than all other airports in the country since it commenced operations in May 2014, adopting the rates of KLIA’s LCCT.
“Given that the services, facilities and infrastructure at klia2 are more comparable with that at KLIA than the LCCT, the commission is of the view that a continuation of lower PSC rates at klia2 could provide an unfair pricing advantage for carriers operating out of klia2,” it said.
Mavcom also feared that the continuation of differentiated PSC rates would give rise to a risk that passengers at KLIA will subsidise passengers at klia2.
“Therefore, it is appropriate to equalise PSC rates between the two terminals,” it added.
Mavcom will perform a review of the PSC in a year’s time with a view to equalising the PSC at KLIA and klia2 for international (beyond Asean) flights as well.
“In the long term, equalised PSC rates will facilitate an environment of fairer competition among airlines operating at these two terminals.
“Equalisation of PSC rates at KLIA and klia2 also enables Malaysia to be better aligned to international guidelines, including with the International Civil Aviation Organization principle of non-discriminatory pricing at airports.”
Aside from the revised PSC rates, Mavcom will introduce measures to ensure airport operators remain committed and accountable for improving airport service levels and financial efficiency.
Mavcom is currently developing a framework — to be introduced in 2017 — that links aeronautical revenues to customers’ and stakeholders’ satisfaction levels.