Mavcom takes Loke to task over merger remarks

MALAYSIAN Aviation Commission (Mavcom) has challenged remarks made by Transport Minister Anthony Loke (pic) in a business publication that questioned the embattled aviation regulator’s credibility. 

The Edge Weekly published a “candid interview” with Loke for its Dec 23-29 issue, discussing the government’s decision to merge Mavcom with the Civil Aviation Authority of Malaysia (CAAM). 

Loke was quoted as saying: “Nobody recognises Mavcom as the authority for civil aviation,” “Mavcom refused to execute a Cabinet decision on the Passenger Service Charge (PSC)” and “Mavcom is free to implement the RAB (regulatory asset base).”

The context is the public outcry over the Cabinet’s decision to disband Mavcom with concerns ranging from the loss of an independent regulator to the prospects of Malaysia Airports Holdings Bhd (MAHB). 

In a Jan 7 statement, Mavcom maintained that it was not consulted prior to the merger decision. “Had that been done, the Cabinet would have had the benefit of a fuller range of views in arriving at its decision,” the regulator said. 

Below are excerpts of Mavcom’s response to Loke’s remarks:

“Nobody recognises Mavcom as the authority for civil aviation”

Mavcom was enacted by an Act of Parliament (the Malaysian Commission Act 2015 [Act 771]), to be an independent economic regulator for the civil aviation industry in Malaysia, being responsible for functions which include commercial licensing of aviation service providers, air traffic rights allocation, competition matters, consumer protection, setting airport charges and administration of public service obligations. Mavcom duly commenced operations on 1 March 2016. The issue of recognition under the laws of this country does not arise.

Since that date, the commission has been interacting with airlines, airport operators, ground handlers, investors, analysts, banks, consumers, consumer bodies, travel associations, and government agencies – all from and also outside of Malaysia – on subject matters which Mavcom is legally responsible for. As one of many examples, Mavcom interacts via AeroFile* with over 163 airlines for all landing permit applications in Malaysia.  

The commission has also been interacting closely with foreign civil aviation and competition authorities, and major international aviation bodies such as the International Civil Aviation Organisation (ICAO), International Air Transport Association (IATA), Airports Council International (ACI), Association of Asia Pacific Airlines (AAPA) and Organisation for Economic Cooperation and Development (OECD), on matters related to economic regulation and consumer protection for the civil aviation industry in Malaysia and abroad. 

Mavcom’s advice on various subjects – including airport economics, air transport liberalisation, air connectivity, consumer protection and airline competition – has also been sought by our local and international stakeholders. 

Mavcom “refused to execute a Cabinet decision” on PSC

The law, the Malaysian Aviation Commission Act (Act 771), Section 46, states that aeronautical charges are to be set and gazetted by Mavcom. Section 46 of the Act further defines the way such charges are to be set – that is the methodology chosen should be made known to all stakeholders and the charges be determined in consultation with them. 

The rule of law dictates that these provisions in the Act be adhered to and the commission has acted in accordance with the law. 

The issue of the commission not gazetting the Cabinet decision on this matter does not arise. We had subsequently briefed the Prime Minister and selected Cabinet members on this matter. 

 “Mavcom free to implement RAB”

The RAB framework involves not only the calculation and setting of airport charges but also other follow-up works subsequent to the setting of those charges. These follow-up works include monitoring of Malaysia Airport Holdings Bhd’s (MAHB) implementation of its capital and business plans and evaluating its operational performance. 

This is consistent with the long-term nature of airports as an infrastructure business and the RAB as a long-term multi-period airport funding model. Failure to perform these follow-up works results in airport operators operating in ambiguity, investor confidence undermined and the RAB framework rendered meaningless.

In light of Mavcom’s disbandment announced by the Ministry of Transport in December 2019, these critical follow-up works will, therefore, have to be performed by CAAM over the longer term should the RAB airport funding model proceed. 

Therefore, Mavcom is presently evaluating the next steps for the RAB airport funding model given this new reality. The commission’s evaluation will need to take into consideration CAAM’s readiness to perform these follow-up works and their priorities, especially in light of its recent downgrade by the US Federal Aviation Administration (FAA).

The commission believes the RAB airport funding model should be undertaken meaningfully and professionally if they are to proceed. 

*AeroFile is an automated filing system created by Mavcom in 2018 that decreased processing of landing permit applications from 30 days (when this function was carried out by the Ministry of Transport) to the current seven working days for scheduled flights and from 14 to three working days for non-scheduled flights.

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