Mavcom still in the picture, for now


THE fate of the Malaysian Aviation Commission (Mavcom) remains uncertain following the abolishment of the Land Public Transport Commission (SPAD).

Transport Minister Anthony Loke Siew Fook said Mavcom’s role is being reviewed although it has several immediate tasks at hand.

“We will have to work closely together to integrate the work. I look forward to having more dialogues between the ministry, Mavcom and industry players to iron out all the disputes within the industry,” Loke told a media briefing in Kuala Lumpur on Monday.

One of his first moves after taking office was to dissolve SPAD, after Prime Minister Tun Dr Mahathir Mohamad announced agencies with duplicate roles will be disbanded. SPAD’s dissolution was in line with actions to cut government spending.

Dr Mahathir also announced the shutdown of three other government- linked agencies, namely the Special Affairs Department, National Professors Council and the Federal Village Development and Security Committee.

Mavcom’s establishment dates back only two years. Despite an industry veteran’s defence of its existence, consumer groups such as
the Malaysian Public Transport Users Association have questioned the role of the regulator and the RM1 levy it imposes on travellers.

Loke said the fee collection is needed to meet the agency’s RM25 million operational costs per annum.

It is estimated that Mavcom acquires RM35 million from the service charge based on a quotation of RM1 each for 35 million passenger movements.

He said any excess from the collection will be channelled to a designated fund to develop the local aviation industry.

“Mavcom is not allowed to use the extra proceeds at will. Every year, they have to report their financials in detail to Parliament. I’ve made it clear that the new government practises high transparency.

All decisions will be made based on full transparency and disclosure,” Loke said.

In a separate statement, Mavcom expects the civil aviation industry to grow between 6.5% and 7% in 2018, after posting a solid 8.1% passenger traffic growth last year, which equated to 99.1 million international and domestic passengers movements.

This year, the country is anticipated to surpass the 100 million passenger per annum mark for the first time.

The country’s aviation industry has witnessed a significant turnaround between 2014 and 2017 to pivot from a RM500 million operating loss in 2014 to an operating profit of RM1.6 billion in 2017.

The market capitalisation of listed local aviation companies has also risen by 38.4% over the same period from RM18.4 billion to RM25.6 billion, outperforming the FBM KLCI by 50.5%.

Air connectivity has improved with the addition of eight international destinations and 360,000 additional seats.

Commercial non-scheduled service operators reported an overall improvement in operating profit margins from 10.4% in 2016 to 16.7% in 2017.

The financial performance of individual subsegments was mixed. However, with the aerial work, oil and gas, and on-demand chartered flight services, subsegments are seen profitable.

A major setback for the industry this year is the rise in crude oil price, which is expected to increase between 10.7% and 30.5% based on various forecasts, including the International Air Transport Association.

This may exert downward pressure on airlines’ profitability, which has already been rendered sensitive by a competitive low-fare environment.

Mavcom noted that strong demand, improved seat inventory control and greater air connectivity provide a solid base for growth for the industry.

“The last two years have been strong from an industry standpoint as shown by passenger traffic growth, industry operating profitability and the market capitalisation of public-listed aviation companies during this timescale, especially in comparison to the
immediate per iod before,” Mavcom executive chairman Gen (R) Tan Sri Abdullah Ahmad said.