Mavcom says time for more airport operators

Mavcom says an increase in air connectivity would attract not just greater tourism and commercial activity, but also human capital. (Bernama pic)

KUALA LUMPUR: The national aviation commission today stressed the need to expand air connectivity to more major international destinations to improve Malaysia’s aviation industry.

It also said there should be no monopoly in the running of airports.

Malaysian Aviation Commission (Mavcom) chief operating officer Azmir Zain said their research indicated that an increase in connectivity would attract not just greater tourism and commercial activity, but also human capital, which would spur economic growth and prosperity in the country.

He was presenting Mavcom’s recommendations for the development of the civil aviation sector in Malaysia at a function at Mavcom’s headquarters.

According to 2018 data, Malaysia ranks number four in airline connectivity, after Indonesia, scoring 94.5% in the air connectivity index. It serves 128 international destinations and 43.5 million international passengers.

Indonesia scored 106.3%, but serves only 75 international destinations. Azmir attributed their higher score to existing connections with better-quality international airport destinations which had large connectivity.

Meanwhile, Mavcom’s executive chairman Nungsari Ahmad Radhi cautioned that Malaysia’s passenger traffic growth might be coming from domestic users rather than international. Earlier, Mavcom predicted a 5% to 6% passenger traffic growth for 2020, but revised it to 4.6% to 5.7% due to the outbreak of the novel coronavirus.

He said this meant connectivity to other international destinations was poor, as local airlines tended to fly around Asia and Australia and most did not have established networks with Europe or US airports.

The aviation body subsequently outlined three strategic pillars to achieve greater connectivity: a fair and competitive commercial environment, appropriate airport infrastructure and a strong human capital base.

Mavcom recommends that the government look into better airport infrastructure in terms of services and operations. It also suggested having appropriate funding models for airports and air navigation service providers, such as through the Regulated Asset Base (RAB) financing method.

Azmir said Mavcom would announce more details about the RAB framework soon.

Fair competition

Mavcom also calls for greater competition by introducing more airport operating companies.

Azmir said, 39 of 42 commercial airports were being operated by Malaysia Airports Holdings Berhad (MAHB) under an operating agreement. “That is, in effect, a monopoly or near-monopoly industry structure,” he said.

He added that there were greater long-term benefits for Malaysia and the industry if there were more airport operators in the market, as this might result in improved services and financial and operational efficiency.

However, he said this proposal should be introduced in phases to protect investor confidence in MAHB.

“The process of introducing greater competition in the airport sector in Malaysia should be done gradually and judiciously. The whole situation of there being a handful of profitable airports and there being quite a number of non-profitable airports would allow a situation where an investor may cherry-pick a profitable airport,” he said, adding that this could have a detrimental effect on MAHB.

Mavcom also suggests abolishing “golden shares” in the aviation industry.

Azmir said the current situation could give rise to the government taking policy decisions in favour of companies it had shares in.

He added that government shares might “blur their role” together with that of the companies’ board of directors who would appoint senior management staff.

FAA downgrade

Azmir said the FAA downgrade reported last November might have an estimated revenue-at risk of RM360.8 million for Malaysian carriers, and RM10.8 million for aerodrome operators this year.

Malaysia’s air safety rating was previously downgraded to Category 2 by the US aviation authority, restricting the country’s airlines from adding flights to the United States.

The downgrade was reportedly not an assessment of Malaysian airlines, airports or air traffic services but only referred to the Civil Aviation Authority of Malaysia’s role as regulator.