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MAVCOM to Ensure Government Unburdened by Subsidies for Airports

23 Oct, 2019


MAVCOM to Ensure Government Unburdened by Subsidies for Airports
Passengers at almost all commercial airports in Malaysia to enjoy lower PSC  

KUALA LUMPUR, 23 October 2019: The Malaysian Aviation Commission (MAVCOM) is in the final stages of completing its Regulated Asset Base (RAB) framework which forms the basis for funding and developing the airport network in the country. This is in accordance with its statutory responsibility as contained in the Malaysian Aviation Commission Act 2015 [Act 771]. The total planned development spending for the next regulatory period (2020-2022) as well as the new Passenger Service Charges (PSC), landing fees and aircraft parking fees will be announced soon. 

The Commission has been conducting a comprehensive study on the RAB framework since 2017 and has engaged over 80 stakeholder groups including relevant ministries such as the Ministry of Transport, Ministry of Finance and the Ministry of Economic Affairs, amongst others. Other stakeholders engaged include airlines, airport operators, international aviation bodies and the investment community. 

 Throughout the two-year period, the Commission had also released a series of information and consultation papers to seek necessary feedback in the formulation of the RAB framework and its resultant development spending, PSC, landing fees and aircraft parking fees for airports in Malaysia. The papers were also uploaded on MAVCOM’s website for stakeholders’ feedback.

 The Commission expects the finalised RAB framework to:

  • Ensure adequate funding is available to meet Malaysia’s airport maintenance and development needs;
  • Institute conditions for more disciplined capital expenditure spending in Malaysia’s airports sector;
  • Eliminate any need for government subsidy or government expenditure in the airports’ development and management;
  • Create differentiated PSC rates for groups of airports, depending on their service levels and infrastructure;
  • Reduce the PSC for almost all commercial airports in Malaysia and ensure airport charges in Malaysia remain amongst the lowest in the region;
  • Enable a level playing field and an environment for healthy competition for the airlines sector; and
  • Ensure greater transparency and provide more regulatory certainty for investors.

The Commission has presented the RAB framework with four different airport tiers for PSC to policy makers, including the Prime Minister of Malaysia, Yang Amat Berhormat Tun Dr. Mahathir Mohamad. 

Executive Chairman of MAVCOM, Dr. Nungsari Ahmad Radhi said, “MAVCOM is deeply appreciative of YAB Prime Minister’s feedback on the Commission’s RAB framework. 

MAVCOM briefed the Prime Minister of the work that the Commission has undertaken for the benefit of travelling passengers, and how a clear and transparent funding mechanism is required to ensure enough investments are made in Malaysia’s airports especially the major airports which require major upgrades. The proposed RAB framework can achieve this without any fiscal burden to the Government. In fact, the Government will enjoy returns in the form of User Fees paid by airport operators to the Government. “The Commission estimates that the Government would have to incur approximately RM300 million per annum in subsidies if the PSC is not properly set and under-investments in airports will continue. With the Commission’s RAB framework, the Government will instead be able to allocate its resources to other pressing needs in the country.”

The Commission estimates more than 20 million passengers in Malaysia will enjoy a lower PSC following the introduction of the RAB framework. Amongst the airports that are expected to charge lower PSC are Langkawi, Pulau Pinang, Kota Kinabalu, Kuching, Miri, Sibu, Tawau, Lahad Datu, Kota Bharu and Alor Setar. 

 “The RAB framework is consistent with Act 771 and it is in that spirit we sought the views of various stakeholders in determining rates that are equitable and make economic sense. The decision to set charges must be viewed in its entirety and not to benefit any one entity and have multi-pronged benefits that will ensure investor confidence in the aviation sector in the longer term. What is crucial is that any decision pertaining to the implementation of the PSC and airport development must be undertaken in an orderly manner adhering to the rule of law without causing unnecessary and undue confusion as well as distress to the market,” added Dr. Nungsari. 

 MAVCOM continues to work towards implementing new rates from 1 January 2020 and will make the necessary announcements in due course.