Revised airspace charges will not affect demand, analysts say

Malaysia’s aviation charges are ‘ridiculously’ cheap, compared to other countries, says analyst

by DASHVEENJIT KAUR/ pic by MUHD AMIN NAHARUL

THE government’s move to review the air navigation facility charges (ANFC) will have minimal impact on demand from passengers, even if the cost is passed to them in the form of higher fares, analysts said.

Transport Minister Anthony Loke (picture) said on Monday that the government through Civil Aviation Authority of Malaysia (CAAM) plans to review all the current airspace charges in order to increase the body’s revenue.

Loke said this is partly due to the US Federal Aviation Administration’s (FAA) claim that Malaysia’s remuneration packages were not attractive enough to attract top aviation talents.

“One of the revenues for civil authorities in the world is the overflight charges, meaning that any airlines using our airspace need to pay ANFC,” Loke said early this week.

Maybank Investment Bank Bhd aviation analyst Mohshin Aziz said the increase of ANFC has been anticipated as it is long overdue.

“It will increase airlines operating cost for sure. Ultimately, they will pass it to the consumers in the form of higher ticket prices,” he told The Malaysian Reserve (TMR) when contacted yesterday.

Still, Mohshin said Malaysia’s aviation charges are “ridiculously” cheap, compared to other countries. He also said the charges will not have a material impact on passengers’ demand.

“The general flying public are people of reasonable income means. In September 2019, the government imposed a departure levy for international passengers. According to the September and October traffic statistics, it had no visible impact at all,” he explained.

Meanwhile, Nomura Securities Malaysia Sdn Bhd transport analyst Ahmad Maghfur Usman also expressed a similar opinion, saying that passing the additional cost to consumers due to the rise in the charges would not have effect on the demand.

“On the demand side of things, we reckon such increase will not hit demand, even if the hikes are passed on to passengers,” he told TMR.

The revision of the overflight charges, according to Loke, is necessary to increase its revenue and improve its operation.

The charges would be applicable for domestic and foreign airlines flying through Malaysia’s airspace.

Loke said the government would give notice to airlines on the charges once details were finalised, claiming that airlines would understand the need to review the charges to ensure the civil aviation and air traffic controllers are more efficient to regain international standard.

Additionally, the revised charges would make CAAM to be financially independent, said Loke.

Earlier this month, the FAA downgraded CAAM to Category 2, following an audit in April 2019. Malaysia held a Category 1 rating from 2003.

The lowered rating means that CAAM does not meet the International Civil Aviation Organisation safety standards, the FAA said.

On Nov 19, American Airlines unilaterally cancelled its codeshare on services operated by Malaysia Airlines Bhd, shortly after the FAA downgrade.

The Malaysian carrier confirmed the cancellation, stressing that it is still placing its code on American-operated services. Both airlines are members of the Oneworld alliance.

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CAAM to review airspace charges, says Loke