By Emmanuel Samarathisa
MALAYSIAN carriers stand to lose more than RM4 bil in revenue in 2020 if the country bears the full brunt of the US Federal Aviation Administration (US FAA) downgrade, says the Malaysian Aviation Commission (Mavcom).
In November last year, US FAA dropped Malaysian air safety ratings from Category 1 to Category 2, after finding deficiencies in its audit of the Civil Aviation Authority of Malaysia (CAAM).
“The immediate consequence is that Malaysian carriers are banned from expanding existing routes to the US or operating new ones,” Mavcom said in its Feb 11 report titled “The Economic Impact and Implications of the Civil Aviation Authority of Malaysia’s Rating Downgrade”.
This affects both direct routes operated by Malaysian carriers and those operated jointly with US airlines such as American Airlines Inc.
“It is estimated that revenue-at-risk for the Malaysian aviation sector (in 2020) is RM371.6 mil, of which RM360.8 mil is at risk for Malaysian carriers and RM10.8 mil for aerodrome operators,” Mavcom said.
Further, while near-term impact might be marginal, the overall effects can be “much greater”, said Mavcom, “if the US FAA audit triggers similar audits by other civil aviation authorities.”
According to Mavcom, in 2018, 11.4% of total passenger traffic – translated to 7.1 million passengers – travelled between Malaysia and China, Japan, and South Korea on Malaysian carriers.
“If the civil aviation authorities of these countries follow the US FAA’s actions, the estimated revenue-at-risk for Malaysian carriers is RM4 bil (24% of total revenue) while the corresponding value for aerodrome operators is RM0.4 bil (24.9% of total revenue),” Mavcom said.
On Dec 11, the Cabinet approved for the country’s aviation regulators to be under one entity.
This means Mavcom would be disbanded with its key functions being absorbed into CAAM.
The Ministry of Transport (MoT) that day said the rationalisation exercise was aimed to improve efficiency.
But CAAM’s capabilities, especially its technical know-how, have been a cause for concern as the agency has struggled with hiring the right workforce as it falls under the purview of the Public Services Department.
Mavcom was formed on March 1, 2016, under the Malaysian Aviation Commission Act 2015.
The Department of Civil Aviation, an agency under the MoT, was incorporated into a statutory body, namely CAAM, effective Feb 19, 2018, under the Civil Aviation Authority of Malaysia Act 2017.
Unlike CAAM, Mavcom is funded through a regulatory service charge of RM1 imposed on passengers.
Mavcom’s purview is geared towards economic and consumer issues of the civil aviation sector, while CAAM oversees technical issues such as safety, maintenance and security. – Feb 11, 2020
