Newsbreak: Mavcom takes over management of Rural Air Services

This article first appeared in The Edge Malaysia Weekly, on February 5, 2018 - February 11, 2018.

The government and the Ministry of Transport will remain the policymaker for the RAS. Photo by Haris Hassan/The Edge

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THE Malaysian Aviation Commission (Mavcom) is taking over the administration and oversight responsibilities of the Rural Air Services (RAS), a fully subsidised air operation that connects rural areas in Sabah and Sarawak.

However, the appointment of the operator still lies with the federal government, through the Ministry of Transport.

According to the commission’s chief operating officer, Azmir Zain, the administrative and oversight responsibilities have been gradually transferred to Mavcom since last year. “The idea is for Mavcom to take over the administration (of the RAS) entirely by January 2019,” he tells The Edge.

The policymaking will remain in government hands, he adds. “The government and the Ministry of Transport will still be the policymaker for the RAS. They will still determine, for example, which routes it will serve. They will still be the counter-party to the RAS agreement with the operator.”

Since its creation in March 2016, Mavcom has had its hands full, putting forward new regulations for airlines and airport operators. Soon, it will also crack the whip on the operator of the RAS.

“We would be looking to ensure that the services provided by MASwings Sdn Bhd under the RAS are of good standard,” Azmir says, adding that these include ensuring the on-time performance of its flights, sufficient connectivity along the RAS routes and reasonable air fare levels.

The commission will also scrutinise the costs incurred in running the RAS and manage the disbursement of its subsidies.

Should the RAS operator fall short of these standards, financial penalties are “on the cards”, Azmir says.

MASwings, a wholly-owned subsidiary of Malaysia Aviation Group Bhd, which, in turn, is fully owned by Khazanah Nasional Bhd, has served the RAS routes since taking over from Fly Asian Express Sdn Bhd — which is now known as AirAsia X Bhd — in October 2007. Last year, the federal government extended its RAS concession with MASwings to 2024.

The Ministry of Transport defines the RAS as a non-economical aviation service to provide access to the interior of Sabah and Sarawak where air transport is the primary form of connectivity to the outside world.

MASwings operates 49 RAS routes, connecting 10 airports and 14 airfields in the two states. It deploys the Twin Otter Viking DHC6-400 to serve 30 of the routes while the rest are served by 10 ATR 72-500s.

The government fully bears the cost of operating the RAS routes by way of subsidies and aircraft rental payments. The annual subsidy bill for the seven-year period up to 2024 is about RM190 million, according to the ministry.

In 2016, the ministry spent RM216.72 million on RAS subsidies. In terms of aircraft leases, an ATR 72-500 costs US$170,000 per month to run while a Twin Otter DHC6-400 lease costs US$59,000, the ministry told Parliament last year.

Last November, the government said six routes would be dropped from the RAS coverage effective 2019, citing a Mavcom survey that showed that these routes, which are also served by commercial airlines, have high load factors of up to 86%.

The routes are Kota Kinabalu- Sandakan, Kota Kinabalu-Tawau, Kota Kinabalu-Miri, Kuching-Miri, Kuching-Bintulu and Kuching-Sibu. From 2019, the routes will no longer be subsidised.

While Mavcom had raised the possibility of a competitive bidding process for future RAS operatorship appointments, the transport ministry dismissed the proposal last year, saying this was not being considered for the near future.



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