Mavcom confirms plan to charge travellers leaving Malaysia RM1

This article first appeared in The Edge Financial Daily, on August 16, 2017.
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KUALA LUMPUR: The Malaysian Aviation Commission (Mavcom), in its bid to fund its operations after government financing is scheduled to cease by next year, has confirmed that it is planning to charge air travellers departing from Malaysia a levy of RM1 from January, if an amendment bill to expand its powers is passed.

“I can confirm there is a definite plan by Mavcom to charge a RM1 levy to all departing passengers from Malaysia, with the exception of those flying the Rural Air Services (RAS) in Sabah and Sarawak,” said Mavcom chief operating officer Azmir Zain.

The bill to amend the Malaysian Aviation Commission Act 2016 to allow the RM1 levy to be collected was reportedly tabled in parliament on Aug 8. Azmir expects the second reading to take place in the next parliamentary session in October.

If the bill is passed and the levy imposed, it could bring in an estimated RM21.81 million a year to Mavcom, judging from the number of international passengers departing from Malaysia Airports in 2016, excluding Sabah and Sarawak’s RAS passengers.

In 2016 the number of passengers departing from Malaysia, minus those on the RAS, stood at 21.81 million, Malaysia Airports Holdings Bhd (MAHB) told The Edge Financial Daily when contacted.

At the launch of the inaugural Mavcom’s Malaysian Aviation Industry Outlook Waypoint yesterday, Azmir declined to confirm the amount the commission could reap from the levy, though he said the levy was decided in the hopes of enabling the commission to be financially independent.

Prior to this, it was reported that the government will cease funding Mavcom’s operations starting next year, after funding it for two years since its establishment in 2016.

Meanwhile, the commission is looking to implement a complete equalisation of the passenger service charge (PSC) among all local airports next January.

“The international PSC for destinations beyond Asean in klia2 is still lower in comparison with KLIA and other airports. A complete equalisation, which we are currently reviewing this year, will potentially result from [the current] RM50 to increase to RM73”, said Azmir.

In January this year, Mavcom raised the PSC for international flights from RM65 to RM73 for KLIA and other airports, while the rate for klia2 was raised from RM32 to RM50.

Azmir, however, gave assurance that the commission would ensure that the PSC remains among the lowest rates in the world.

Meanwhile, Azmir said the commission has been working hand in hand with airlines to refund the PSCs charged in situations where air tickets are cancelled or when passengers do not board their flights, to ensure the refunds would go back to the consumers.

“In fact, one carrier [Malindo] has dropped, entirely, any administrative charges for PSC refunds back to the consumers,” he said, citing it a progressive collaborative effort between the commission and airlines.

On the local aviation industry outlook this year, Mavcom expects total aggregate revenue for the industry to remain flattish despite higher passenger traffic seen.

According to its report released yesterday, Malaysia’s air passenger traffic market recorded a 10.4% year-on-year growth for the first seven months of 2017 and is poised for a 7.8% to 8.8% full-year growth from 2016, to reach between 98.3 million and 99.2 million passengers.

However, Mavcom expects average air fares to continue declining this year, due to competition among carriers, largely due to new capacities being added to the industry and the number of air traffic rights allocated over the past six months, suggesting new frequencies and destinations being created.

Mavcom also noted that significant capital expenditure (capex) would be required to address capacity requirements for key airports in Malaysia, especially for those that are operating beyond their theoretical terminal design capacities, or are expecting to in the next five years.

These include airports in Penang, Subang, Langkawi, Kota Baru, Miri, Kuching and Kota Kinabalu.

“In terms of financial options, historically the government has been funding capex for the airports. In the case of klia2, MAHB funded it itself. These would continue to be the two most likely options for future capital expenditures”, said Azmir.