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MAVCOM Announces Revisions to the Aviation Services Charges (ASC)

12 Mar 2024

Revisions Tailored for Consumer Benefit and Aviation Industry Revival post-COVID-19 Pandemic

Summary:

  • The stability and robustness of the aviation industry take precedence, encouraging air travel for consumers
  • Domestic Passenger Service Charge (PSC) is retained to ensure affordability for passengers
  • Reduction of international PSC beyond ASEAN for all airports other than KL International Airport Terminal 1 (KUL Terminal 1)
  • Introduction of a transfer PSC across all airports
  • The revised PSC rates will take effect from 1 June 2024

KUALA LUMPUR, 12 MARCH 2024 – The Malaysian Aviation Commission (MAVCOM) today announced revisions to the Passenger Service Charges (PSC) for the First Regulatory Period (RP1), spanning from 1 June 2024 to 31 December 2026. The introduction of the revised rates is designed to support the aviation sector’s recovery and adaptability in the post-COVID-19 pandemic environment. The revised rates also reflect MAVCOM’s dedication to maintaining a balanced and consumer-oriented approach within the dynamic aviation sector.

This revision falls under MAVCOM’s responsibility for the economic regulation of the Aviation Services Charges (ASC) in Malaysia under section 46 of the Malaysian Aviation Commission Act 2015 [Act 771], which includes the power to set aviation services charges such as the PSC, aircraft landing and parking charges, among others.

The PSC revision was made after a comprehensive and extended consultation process that commenced in 2021. This inclusive approach underscores MAVCOM’s dedication to taking into account feedback from a broad spectrum of stakeholders, including relevant ministries and agencies such as the Ministry of Transport (MOT) and Ministry of Finance (MOF), industry players, fund managers, analysts, international aviation bodies and consumer associations. Multiple consultation sessions were conducted, complemented by the issuance of 2 consultation papers. Each step was taken to ensure a holistic understanding and consideration of various perspectives before finalising this decision.

Table 1 indicates the newly revised PSC rates set by MAVCOM for RP1 payable by passengers departing from and transferring through Malaysia. The rates include a security charge for the provision of security services at airports.

Table 1: Current and revised PSC rates for departures from airports in Malaysia

Source: MAVCOM

Note:

  • For context, the term *through refers to passengers who are transferring to another flight and will be charged a transfer PSC. 
  • KUL Terminal 2 refers to KL International Airport Terminal 2.
  • The rates above are not applicable to Senai International Airport (JHB). Please refer to page 3 of this news release for more information.

The following are the main highlights of the newly revised rates:

  1. Passenger benefit:

Domestic PSC retained, ensuring affordability, and spurring local travel: The Commission maintains the domestic departure PSC at RM11 at all airports except Senai International Airport (JHB)*, acknowledging the crucial role of domestic air travel in connecting Peninsular Malaysia to Sabah and Sarawak. The Commission’s decision supports affordability for passengers and sustains local air travel and tourism

Lower international PSC at all airports other than KUL Terminal 1: In recognition of the varied price sensitivities and willingness to pay among passengers bound for international destinations, the Commission has adjusted the international PSC. For KUL Terminal 2 and other airports, which predominantly cater to short-haul flights, the international PSC is set at RM50. This rate is lower than the RM73 charged at KUL Terminal 1. Factors influencing this decision include the higher price elasticity associated with short-haul routes, purchasing behaviours favouring low-cost carrier models, and a more price-sensitive demographic compared to passengers at KUL Terminal 1.

  1. Industry competitiveness and growth:

Single unified International PSC: With the new PSC rates, the ASEAN and beyond ASEAN PSC have been unified into a single international PSC of RM73 for KUL Terminal 1 and RM50 for KUL Terminal 2, as well as other airports. The decision acknowledges the similar facilities and services utilised by departing passengers to any region, thereby imposing comparable costs on airport operators.

The introduction of transfer PSC: For RP1, the Commission has introduced a transfer PSC at all Malaysian airports. This charge requires transfer passengers to contribute towards the costs of airport infrastructure that they utilise. The adoption of a transfer PSC in Malaysia mirrors practices found in other airports across Asia, including Singapore, Thailand, and Japan, as well as in European countries such as the United Kingdom, Germany, and France.

PSC at other airports: MAVCOM has allowed other airports that are not operated by subsidiaries of Malaysia Airports Holdings Berhad (MAHB) [Malaysia Airports (Sepang) Sdn. Bhd. and Malaysia Airports Sdn. Bhd.], namely *JHB, Kerteh Airport (KTE), and Tanjung Manis Airport (TGC), to propose tariffs for RP1 to the Commission. This allowance is based on a market power assessment conducted by the Commission, which determined that these airports either lack market power or the capability to exercise it. Both KTE and TGC have opted to adopt the rates recommended by the Commission. Meanwhile, JHB has opted to implement a separate rate structure, with the approved rates outlined in Table 2 below:

Table 2: Current and revised PSC rates for departure from Senai International Airport (JHB)

Source: MAVCOM

Note: For context, the term *through refers to passengers who are transferring to another flight and will be charged a transfer PSC.

Other non-PSC ASC adjusted for inflation: Over the RP1 period, tariffs for aircraft landing and parking, and all other ASCs, including airport pass charges, airside vehicle permits, as well as airside driving permits, will be adjusted to account for inflation. The Commission has determined that adjustments based on the Consumer Price Index (CPI) escalation represent the minimum necessary change to ensure that tariffs accurately reflect changes in costs.

MAVCOM’s Executive Chairman, Datuk Seri Hj. Saripuddin Hj. Kasim said, “Acknowledging the impact of the COVID-19 pandemic on both the industry and consumers, we have carefully recalibrated our approach. The implementation of the revised PSC is the cornerstone of our strategy to safeguard consumer welfare, support a sustainable and resilient recovery, and ensure the aviation sector’s financial stability while adapting to evolving market conditions. The PSC tariff announced today reflects feedback from various stakeholders, aiming to support the industry’s long-term viability, recovery, and competitiveness. By prioritising stability, we have introduced measures to ensure that these rates do not burden passengers, thereby invigorating travel demand. Simultaneously, we ensure airport operators maintain financial viability, allowing them future refinancing opportunities at reasonable rates and continued investment in efficient airport infrastructure”.

As outlined in the Gazette under the Malaysian Aviation Commission (Aviation Services Charges) Regulations 2016, the PSC applies to departing and transferring domestic and international passengers at all national airports. The upcoming revision will be effective on 1 June 2024. It is important to note that tickets issued before 1 June 2024 will not be subjected to the new rates, even if the date of travel occurs on or after 1 June 2024

 The current revision period is effective from 1 June 2024 until 31 December 2026. More information on the PSC and other ASCs is available in the Decision Paper on the Regulation of Aviation Service Charges for RP1, which can be found below: