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Consumer welfare and fair competition must take precedence

13 Jun, 2018

MAVCOM: Consumer welfare and fair competition must take precedence
Penalty and Compliance Matrix to be implemented

 

KUALA LUMPUR, 13 June 2018 – With reference to a recent media report entitled “MAVCOM rejects AirAsia’s application for more KL-Haikou, KK-Sandakan flights”, the Malaysian Aviation Commission (“MAVCOM”), would like to state:

  • The allocation of air traffic rights (ATR) follows a process that has been discussed in close consultation and finalised after taking into consideration airlines’ views, including AirAsia.
  •  In allocating ATRs, the Commission facilitates orderly growth and is concerned for the risk of overcapacity as this could lead to flight cancellations and merging of flights, which will inconvenience consumers.
  •  The Commission on 29 January 2018 approved AirAsia’s application for 7 additional trips per week for the Kota Kinabalu – Sandakan route in addition to AirAsia’s existing 18 weekly trips.
  • The Commission on 3 April 2018 approved AirAsia’s 4 weekly trips for the Kuala Lumpur – Haikou route.
  • These allocations were made pursuant to the ATR allocation process and considerations described above.

In allocating ATRs, the Commission wishes to facilitate orderly growth while also considering the risk of overcapacity (where the supply of seats far exceeds passenger demand) on a particular route. Ill-effects of route overcapacity include heightened risks of unutilised seats, which in turn could lead to flight cancellations and merging of flights, which are detrimental to passenger convenience. In addition, overcapacity gives rise to a risk of a carrier exiting a route, and therefore lessening competition and consumer choice on that route in the long term.

The ATR allocation process itself was designed following close consultation with all Malaysian carriers, including AirAsia. The principles and criteria applied in any ATR allocation has also been made known to all Malaysian carriers.

As at 30 April 2018, the Commission has awarded a total of 397 ATRs to Malaysian carriers since its initiation, of which 295 were utilised by the carriers, while 102 were either not used or subsequently surrendered back to MAVCOM.

The Commission made its decisions with reference to the Kota Kinabalu – Sandakan route and the Kuala Lumpur – Haikou route upon the consideration of an extensive number of factors.

In the case of the Kota Kinabalu – Sandakan, this route was served by AirAsia (18 weekly trips), Malaysia Airlines (7 weekly trips) and MASwings (21 weekly trips) as at December 2017. On 29 January 2018, the Commission approved AirAsia’s application for 7 additional trips per week, bringing the total number of trips for AirAsia for this particular route to 25 weekly trips. In February 2018, AirAsia applied for a further additional 7 weekly trips on this route which the Commission did not approve because of a risk of overcapacity which would inconvenience consumers.

As for the Kuala Lumpur – Haikou route, this route was served by Malaysia Airlines (2 weekly trips) and Malindo Air (2 weekly trips) as at December 2017. AirAsia had previously operated this route but terminated its services in 2012. On 21 February 2018, AirAsia applied to operate 7 weekly trips on this route, and the Commission awarded AirAsia 4 weekly trips on 3 April 2018. The decision to approve 4 weekly trips instead of 7 was similarly due to the Commission’s concern for overcapacity of seats and subsequent impact on consumers.

The Commission has also indicated to AirAsia that it can resubmit its application for both routes in October 2018.

The Commission reiterates that it looks to facilitate orderly growth, competition and consumer choice over the long term, and the prevention of consumer inconvenience, in its work including in the allocation of ATRs. We further urge consumers to exercise their rights as an air traveller in Malaysia as provided by the Malaysian Aviation Consumer Protection Code (which was introduced by MAVCOM in July 2016) and approach the Commission should there be any contravention of their rights.