Travellers in queue to check in at klia2
KUALA LUMPUR: RAM Rating Services views the revised passenger service charge (PSC) structure as a negative development for Malaysia Airports Holdings Bhd
(MAHB).
The ratings agency said on Friday the PSC charges, which were announced by the Malaysian Aviation Commission (Mavcom), should not have an immediate impact on the group’s ratings.
“While PSCs are now higher or remain unchanged in nearly all segments, the revised PSC structure may be detrimental to MAHB’s earnings,” it said.
RAM Ratings explained flights from KLIA 1 to Asean destinations will attract a much lower charge of RM35, which is half of the existing rate of RM71.
It noted that Asean passenger traffic constitutes a large portion of overall international traffic, making up over a third of international travellers at KLIA 1 in 2015.
“Based on MAHB’s 2015 passenger mix, we estimate that the new development could shave off 2%-3% of the group’s operating profit before depreciation, interest and tax.
“More importantly, this development illustrates MAHB’s exposure to regulatory risk inherent in its operations.
“Based on the existing operating agreement entered into by MAHB and the government of Malaysia in 2009, the government is required to compensate MAHB under the marginal cost of support charges mechanism if PSCs imposed by the former fall below the benchmark rates,” it said.
RAM Ratings said benchmark international and domestic PSCs for KLIA 1 care currently at RM71 and RM10.
However, the ratings agency noted that remains to be seen if this arrangement will be maintained in the future.
“A shift towards less predictable and transparent policies or any material changes to the terms of the agreement could have negative credit implications for the group,” it said.
RAM Ratings noted that in addition to its stand-alone credit fundamentals, the group’s ratings incorporate our expectation of government support given its vital role and strong relationship with the government.
Any adverse regulatory developments would also warrant a reassessment of MAHB’s relationship with the latter.
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