This article first appeared in The Edge Malaysia Weekly on September 30, 2019 - October 6, 2019

THE Ministry of Transport (MoT) may miss a Cabinet-agreed deadline to reduce airport tax for passengers departing from all airports, except Kuala Lumpur International Airport (KLIA), to destinations beyond Asean on Oct 1.

Mere days before the lower airport tax — also known as passenger service charge (PSC) — takes effect, the ministry is still grappling with legal issues over its implementation.

At issue is, any change to the tax requires the gazetting of laws, but nothing has been done yet.

While the lower PSC can be gazetted at the parliament sitting next month, an industry observer tells The Edge that this would mean missing the Oct 1 deadline.

“Even if the MoT were to ask the Attorney-General’s Chamber to approve changes to the PSC, the process can take two to three months,” he says.

Observers also point out that the MoT does not have the power to implement changes in PSC even though it has the endorsement of the Cabinet. That is because Section 46 of the Malaysian Aviation Commission Act 2015 mandates that only the Malaysian Aviation Commission (Mavcom) can set aviation charges and carry out reviews of PSC or other aeronautical charges such as aircraft landing and parking fees.

Last month, the MoT announced a decision to reduce the PSC for international flights beyond Asean from RM73 to RM50, to take effect on Oct 1. The move took many by surprise as Mavcom was due to implement new aeronautical charges under the Regulatory Asset Base framework in January.

The MoT, however, has found itself in a sticky situation as to how to proceed.

One industry observer is of the view that Transport Minister Anthony Loke had got ahead of himself by announcing the Cabinet’s decision to reduce the PSC before finding out the way to go about it.

“Operationally, the ministry doesn’t know how to implement the reduction in PSC. The minister has announced something that cannot be implemented for now,” the industry observer says.

It is understood that the MoT has since sought Mavcom and the International Air Transport Association (IATA) for advice.

IATA assistant director of corporate communications for Asia-Pacific Albert Tjoeng confirmed this, saying that the MoT has been in touch with the airline grouping regarding the PSC.

“Discussions are ongoing,” he says in an email reply to The Edge.

Tjoeng adds that Mavcom, the appointed economic regulator for airports, has the mandate and authority to determine airport charges.

Ironically, IATA — which represents about 290 airlines around the world — had earlier this month voiced its disappointment at Malaysia’s decision to reduce the PSC for the beyond-Asean destinations.

While the proposed move is positive for most travellers in Malaysia, IATA says it is “disappointed the Malaysian government has chosen to discriminate against the airlines and 28 million passengers using KLIA”.

“If the intention is to offset the increased charges due to the departure levy, which was introduced on Sept 1, the more straightforward way is to remove the departure levy altogether.

“By introducing this change, the government is creating an uneven playing field for airlines as well as cross-subsidisation of the other airports/terminals by the users of KLIA,” it adds.

A spokesperson for Mavcom says under the Mavcom Act 2015 (Act 771), the commission has been entrusted with the statutory role to determine the methodology as well as the charges for aviation services, including the PSC.

“In setting the charges, the commission is required to consider a set of criteria as prescribed in Act 771. Charges set by the commission take effect upon gazettement of the rates.

“As per the MoT’s announcement on Aug 30, the government wishes to effect a reduction of PSC at klia2 and other airports in Malaysia, other than KLIA, via a subsidy,” the spokesperson adds.

The Edge reached out to the MoT for comment on the matter but it had yet to get a reply as at press time.

“The (reduction in) PSC (to RM50) is another reversal in government policy, but at least, the travelling public will enjoy — courtesy of AirAsia Group Bhd — the ‘Anthony Loke’s Special’ fare in October. How can Malaysians not be happy?” quips Shukor Yusof, an aviation analyst at Endau Analytics.

AirAsia group CEO Tan Sri Tony Fernandes was reported as saying that the low-cost carrier will offer special fare deals in October to celebrate the government’s decision to reduce the PSC and that they will be called Anthony Loke’s Special in honour of the minister. AirAsia has been calling on the government to lower the PSC at klia2 after it was equalised across KLIA, klia2 and all other airports in the country on Jan 1 last year.

In August, Putrajaya gazetted an order to implement the controversial departure levy for departing air travellers on Sept 1, with rates ranging from RM8 to as much as RM150.

The Departure Levy Act was initially scheduled to take effect on June 1, but was postponed. The proposed reduction in PSC could face the same fate.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.