Newsroom / Announcements / MAVCOM’s clarification towards Letter to Editor entitled ‘Losing out in aviation industry’

MAVCOM’s clarification towards Letter to Editor entitled ‘Losing out in aviation industry’

7 Dec, 2018

With reference to factual inaccuracies in a recent Letter to Editor to The Star dated 3 December 2018 titled ‘Losing out in aviation industry’, the Malaysian Aviation Commission (MAVCOM), would like to state the following:

Cabinet approval for allocation of Kota Kinabalu-Sibu and Kota Kinabalu-Bintulu routes

There were 49 routes governed under the Rural Air Services (RAS), a Federal Government programme that ensures air transport is provided for the rural population in Sabah and Sarawak that would otherwise not be served commercially. Since October 2007, all routes served under the current RAS programme have been operated by MASwings, who are paid subsidies by the Federal Government to operate those routes due to their non-commercial viability.

Decisions to exclude any routes from the RAS is a Federal Government decision hence the requirement for Cabinet approval to allow commercial airlines to operate these routes.

On 23 November 2018, the Cabinet approved the allocation of the Kota Kinabalu-Sibu and Kota Kinabalu-Bintulu routes for operation by AirAsia Berhad with effect from January 2019.

MAVCOM had reviewed the RAS programme in 2016 and recommended to the Ministry of Transport for six routes – namely the urban routes of Kuching-Sibu, Kuching-Bintulu, Kuching-Miri, Kota Kinabalu-Miri, Kota Kinabalu-Tawau and Kota Kinabalu-Sandakan – to be removed from the RAS programme. This recommendation was made after reviewing the commercial potential of these routes. Following this recommendation, the Federal Government decided to remove these six routes from the RAS programme.

The Commission also commends the careful consideration of the Kota Kinabalu-Sibu and Kota Kinabalu-Bintulu routes by the Federal Government given the difficult predicament travellers from these areas were faced with in 2007 when Fly Asian Express Sdn. Bhd., the operator of the RAS programme prior to MASwings, prematurely ended their contract to service the RAS routes due to operational and financial difficulties.

Allocation of air traffic rights (ATR)

Section 66 of the Malaysian Aviation Commission Act 2015 provides that the Commission shall be responsible to administer, allocate and manage ATRs for both domestic and international routes, and also lays out key considerations in performing this function including its effect on consumers, the industry as a whole and public interest.

Pursuant to this statutory responsibility, MAVCOM for the year 2018 to-date had allocated 195 ATRs, with the AirAsia Group receiving the highest number of ATRs at 118 ATRs, while Malindo Air were allocated 51 ATRs, Malaysia Airlines 20 ATRs and Firefly two ATRs for the same period. ATRs granted to carriers have a validity of six months and out of the total 195 ATRs allocated, 56 ATRs were returned to MAVCOM as the carriers concerned were not able to utilise the rights within the given timeframe. Only seven ATR applications were rejected by the Commission. Given the high rate of ATR allocation approvals made by MAVCOM, the insinuation made that MAVCOM impedes competition is clearly unfounded.

The ATR allocation process itself was designed following close consultation with all Malaysian carriers. The principles applied in any ATR allocation has also been made known to all Malaysian carriers. All ATR allocations and the few ATR application rejections made by MAVCOM are invariably consistent with these principles.

In addition, the Commission in allocating ATRs is conscious that overcapacity (where the supply of seats far exceeds passenger demand) on a particular route could give rise to a heightened risk 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.  

Closing down of Suasa Airlines, Eaglexpress & Rayani Air

As a recap, the Commission in December 2016 revoked the Air Service Permit (ASP) of Eaglexpress Air Charter Sdn. Bhd., as the airline was unable to meet minimum licensing conditions set by the Commission related to its financial capacity – that it is adequately capitalised and able to meet their financial obligations, thereby lessening the likelihood of compromises made on consumer inconveniences and operational sustainability.  

In the case of Rayani Air, the Commission performed a review of Rayani Air’s capacity to hold an Air Service Licence (ASL) following their unilateral ceasing of operations in April 2016, and found they lacked the commercial and financial capacity to continue operating as a commercial airline. MAVCOM subsequently revoked Rayani Air’s ASL and facilitated credit card charge backs for Rayani Air passengers who had purchased tickets in advance. The then Department of Civil Aviation had also revoked Rayani Air’s Air Operator Certificate, being an airline’s technical licence to operate air services.

In addition, MAVCOM had performed an investigation into Suasa Airlines in July 2016 for performing a commercial air operation without possession of a valid commercial licence. Following the Commission’s investigations conducted together with the Attorney-General’s Chambers, Suasa Airlines was duly prosecuted and pleaded guilty on 9 January 2017 at the Sepang Sessions Court, and was fined RM380,000.  

The Commission’s actions with regard to these three airlines were made pursuant to safeguarding consumer interests and the integrity of the civil aviation industry in Malaysia.

MAVCOM continually seeks constructive feedback and criticism from the industry and stakeholders on its work, whilst at the same continue performing its duties as an independent regulator for the aviation industry pursuing a commercially viable, consumer-oriented and resilient civil aviation industry for Malaysia. For further information on the various initiatives undertaken by Mavcom, please visit our website at www.mavcom.my.