Sub-par airports to be penalised under Airport QoS framework

This article first appeared in The Edge Malaysia Weekly, on December 4, 2017 - December 10, 2017.
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THE Malaysian Aviation Commission (Mavcom) intends to penalise airport operators if they do not meet the service indicators stipulated in the new Airports Quality of Service (QoS) framework, which will be implemented gradually from the third quarter of 2018.

The penalty, which varies according to the service quality category and type of airport, could be up to 5% of the airport’s aeronautical revenue.

“Signalling our higher service expectation on airport operators in Malaysia following the passenger service charges (PSC) revision, the commission is also progressing in its development of the regulatory framework to improve service levels at airports in Malaysia,” said Mavcom in a statement last Thursday. “The objective of the Airports Quality of Service framework is to enhance passenger comfort at the airport, ensure [that] airport operators prioritise consumer service levels and facilitate improved user experiences for airlines, ground handlers and other users of airports in Malaysia.”

Mavcom also announced the increase of the PSC for all international flights beyond Southeast Asia from Kuala Lumpur International Airport 2 (klia2) to RM73 per passenger, from RM50 per passenger previously. The new PSC will be charged on tickets issued from Jan 1, 2018.

The PSC hike completes Mavcom’s drive to equalise passenger charges at klia2 with those of other airports around the country. It is the result of a review taken by the commission after consultations with industry players.

Although Mavcom had published the public consultation paper for the Airports QoS framework in July, many airport operators were not aware of the quantum of the penalty.

The paper, which is available on Mavcom’s website, proposed schemes for the three types of airports — KLIA and klia2, medium- sized airports and small airports.

The grand total for the penalty that would be imposed on KLIA and klia2 would be 5.03% of their aeronautical revenue, according to the paper. For medium-sized airports, the maximum is 3.36% while for small airports, the penalty is 2.65%.

Malaysia Airports Holdings Bhd (MAHB) operates all airports and short take-off and landing ports in the country, except Senai International Airport in Johor, which is operated by Senai Airport Terminal Services Sdn Bhd, a subsidiary of MMC Corp Bhd.

In the financial year ended Dec 31, 2016 (FY2016), MAHB’s Malaysian operations recorded aeronautical revenue of RM1.56 billion. Thus, it could be charged RM78.2 million if its airports do not meet or maintain certain standards required by the Airports QoS regime.

For the nine months ended Sept 30, 2017 (9MFY2017), MAHB’s Malaysian aeronautical revenue was RM1.25 billion, an increase of 8.3% from the same period last year, thanks to sustained growth in passenger traffic and aircraft movements.

When contacted, a Mavcom spokesperson tells The Edge that the QoS framework has not been completed and the commission is still seeking feedback from airlines and other airport users.

However, in an emailed response to The Edge’s questions, Mavcom confirms that the Airport QoS is only applicable to airport operators. The other users include Customs and Immigration. “For shared responsibilities (with users such as Customs and Immigration), we will monitor and possibly publish the results. For items that fall under the airport operator’s responsibilities — in the event its service standards are not maintained or achieved, it could be imposed a financial penalty of up to 5.0% of its aeronautical revenue,” says the commission.

When contacted, MAHB said it “is still in discussions with Mavcom regarding the QoS and 5% penalty, and, thus, cannot comment.”

The announcement of the PSC hike pushed up MAHB’s share price by 1.23% to RM8.25 last Thursday. The counter has risen by 37.8% since the start of the year on the back of better performance at its Malaysian and Turkish operations.

The jump in share price might be an indication that the market does not view the Airports QoS framework as unfair to airport operators, say observers. “The implementation of the QoS framework ensures that passengers are not paying high PSCs unnecessarily without any tangible results or benefits in return. Airport operators will prioritise service to passengers, as it would cost them money if they don’t,” says one observer.

“[The framework] seems fair, although it has to be enforced uniformly, not selectively. It raises performance and productivity [of the airport operators],” says Syukor Yusof, founder of Endau Analytics Sdn Bhd.

In 9MFY2017, MAHB recorded a net profit of RM209.24 million, an almost six-fold increase from the previous corresponding period. Revenue increased by 10% to RM3.4 billion.

 

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