By Emmanuel Samarathisa
ON Sept 9, 2019, a frustrated Tan Sri Tony Fernandes took to LinkedIn to pen an article entitled “Mavcom – a dysfunctional entity.”
In that 1,000-ish-word missive, he berated independent aviation regulator Malaysian Aviation Commission (Mavcom) for failing to “discharge their duties effectively and fairly” and concluded with: “Do we really need Mavcom? I’m yet to be convinced.”
But that article marked the apogee to a years-long skirmish between Fernandes and the country’s two aviation ‘Ms’ – Mavcom and Malaysia Airports Holdings Bhd (MAHB), the airport operator.
Fernandes will emerge the winner. And giving him that leg up was the man, who on Feb 1 last year, boarded a Sibu-bound AirAsia plane to give passengers a “special surprise” (to quote the headline of the video) prior to takeoff.
“Ladies and gentlemen, boys and girls. This is Flight AK9838. Welcome onboard. This flight is bound for Sibu. While we are ready for departure, please get your seatbelts fastened, sit back and relax. So we hope you have an enjoyable flight. Happy Chinese Year, everyone. Safe journey home to Sibu.”
That man was none other than Transport Minister Anthony Loke.
To be sure, 2019 marked the year of regulatory conflicts for Fernandes and the AirAsia group. Mavcom embarked on a pro-consumer campaign, targeting airlines that did not comply with the amended Malaysian Aviation Consumer Protection (Amendment) Code 2019 (MACPC) that came into force on June 1.
MACPC made it compulsory for all airlines in Malaysia to remove processing fees or risk being penalised. AirAsia and its long-haul sister AirAsia X Bhd found themselves in Mavcom’s crosshairs. Both airlines would have been liable for contravening the code as they would only scrap processing fees on Oct 1 for passengers paying through online banking and credit cards.
This was a case of déjà vu. In January, AirAsia stopped charging a RM3 fee on its passengers departing from klia2 after Mavcom deemed it illegal for airlines and airport operators to impose unnecessary charges on passengers in lieu of a stricter MACPC.
Amid this fiasco was the legal tit-for-tat that embroiled AirAsia and MAHB. In January 2018, Mavcom revised the passenger service charges (PSC), a levy imposed on departing passengers, and imposed an equal rate of RM73 for non-Asean international flights at all airports.
But AirAsia was miffed. It was the only airline operating in Malaysia to protest against the hike and continued collecting a reduced PSC of RM50 until the matter had to be taken up to court. When MAHB took legal action, Loke decided to step in and play mediator.
“I want both sides to sit down and thrash it out. Yes, we will mediate it. We hope a harmonious situation will arise,” he told reporters on Dec 13, 2018. But that enthusiasm never materialised to anything but raised questions of government interference in business matters.
On July 18 last year, the Kuala Lumpur High Court ordered AirAsia to pay RM40.6 mil to MAHB subsidiary Malaysia Airports (Sepang) Sdn Bhd in unpaid PSCs collected in 2018.
After the court ruling, AirAsia in an Aug 8 statement said it would collect the full PSC “under protest”. A month later, both AirAsias collectively paid RM41.55 mil in uncollected PSC charges to MAHB.
But Loke would again help relieve AirAsia’s PSC itch. On Aug 31, he announced that PSC for non-Asean international flights out of all airports, except KLIA, had been reduced from RM75 to RM50 effective Oct 1.
The reduced PSC would help cushion the effects of the new and separate departure levy that took effect on Sept 1, Loke told reporters that day. But there was one problem: it is Mavcom, not Loke, that has the authority to set and gazette PSCs.
Loke’s announcement has kept the entire aviation sector in limbo till today. In an Oct 7 article, The Edge observed that only AirAsia and AirAsia X lowered the PSC for international flights beyond Asean from RM73 to RM50, effective Oct 1. The duo’s full-service peers such as Malaysia Airlines Bhd, Malindo Airways Sdn Bhd and China Southern Airlines Co Ltd were still imposing an airport tax of RM73.
But Loke was not done yet. He had another ace in hand. On Dec 12, the Cabinet approved the merger between Mavcom and the Civil Aviation Authority of Malaysia (CAAM). Mavcom executive chairman Dr Nungsari Ahmad Radhi was flummoxed as he and his team were not consulted prior to the decision. “It reflects poorly on those involved in this decision,” he wrote in a statement that day.
Market observers and participants were bewildered. CAAM courted ignominy after the US Federal Aviation Administration downgraded the country’s air safety rating last November. The US FAA dropped CAAM’s International Aviation Safety Assessment (IASA) rating from Category 1 to Category 2.
Equally astounding is the dismantling of an independent regulator that earned its income from passengers through a RM1 regulatory service charge. According to its 2018 Annual Report, Mavcom has a surplus after tax of RM240,194 and an accumulated surplus since its inception in 2016 of RM33.47 mil.
Instead, enlarging CAAM would strain the government’s balance sheet as the agency comes under the purview of the Public Service Department. Also, CAAM is the epicentre of teething problems where staff are underpaid and underskilled, making regulating the aviation industry impossible.
Loke, too, is undecided as to the status of the RM1 service charge. “Once the merger takes place, we will make the decision on whether to continue with this charge or not,” he told reporters recently. And there is the Regulatory Asset Base (RAB) framework which Mavcom was supposed to implement at the start of this year but had been delayed due to various problems, including the proposed merger.
The RAB framework provides earnings visibility to MAHB. Its delayed and uncertain implementation, no thanks to Loke announcing that he was mulling alternative airport funding models during a closed-door forum with fund managers, have kept MAHB’s share price depressed since Oct 17 last year.
Going by Loke’s projections, he is expecting Mavcom to operate at least until June, pending the Dewan Rakyat’s approval to amend related laws governing Mavcom. That is a short amount of time to transform an ill agency such as CAAM.
Maybe because while he has plenty of critics, Loke has found a friend in Fernandes who wholeheartedly lauded the merger. “If it means merging (Mavcom-CAAM) which will make the industry more efficient, then we should support it,” Fernandes told the News Straits Times on Dec 17.
Indeed, now Fernandes can truly fly. Loke has neutered Mavcom. Passengers are left to fend for themselves. MAHB, too, has seen a change at the helm as Raja Azmi Raja Nazuddin quit as CEO on Jan 7.
Filling that role as acting CEO is chief operating officer Datuk Mohd Shukrie Mohd Salleh, who happens to be an ally of Fernandes and formerly COO of AirAsia prior to MAHB. Loke, on the other hand, has stressed that the government had nothing to do with Raja Azmi’s resignation.
So what else can stop Fernandes now? He has a long runway for the perfect takeoff. Then again, there is Santan aka the “first Asean fast-food franchise” which opened its maiden outlet at Mid Valley Megamall to serve up AirAsia’s in-flight menu…