Equal charges will ensure KLIA passengers don't subsidise KLIA2

The international ratings agency said the change in outlook was because of the heightened operating challenges for MAHB

KUALA LUMPUR: The move to equalise passenger service charges (PSC) between the Kuala Lumpur International Airport 2 (KLIA2) and KLIA will go a long way in ensuring fair play and prevent trade distortions between airlines operating at the two terminals.

The move, announced by the Malaysian Aviation Commission (MAVCOM) and to take effect on Jan 1, 2018, would ensure passengers at KLIA and other airports in Malaysia do not end up subsidising for KLIA2.

It is only right that the charges are at parity because the PSC currently remains higher at KLIA despite the facilities and services at KLIA2 being comparable with KLIA.

As such, the decision, made by MAVCOM in October last year, should be accepted and respected by all parties.

Previously, the government set the PSC for KLIA2 -which opened in May 2014- at the same level as the previous Low-Cost Carrier Terminal at Kuala Lumpur International Airport (KLIA), where facilities were considerably below par.

The rationale for equalisation is that KLIA2 is comparable to KLIA and is a more superior airport compared to other airports in Malaysia including Penang, Langkawi, Kota Kinabalu and Kuching.

Therefore, it does not make sense for KLIA2 to have a lower PSC compared to other airports.

PSCs for international departures increased to RM50 for KLIA2 and RM73 for all other airports.

From January next year, international PSCs at KLIA2 would be raised to RM73, equal to the rates for international departures at all other Malaysian airports.

It should be noted, however, that MAVCOM is concurrently doing work to enable PSCs at the secondary airports to be lower than those at KLIA and KLIA2, but this takes time and is expected to take about three years.

The argument is that as long as KLIA2's PSC is lower, PSCs paid by passengers from other airports in Malaysia will go towards the maintenance of KLIA2.

This means passengers are subsidising for a larger airport with more facilities, which those passengers who don't use themselves.

This happens because the lower PSC at KLIA2 is not sufficient to cover for its operating expenditure.

IATA, the Geneva-based International Air Transport Association, has repeatedly voiced support for the equalisation of PSC, saying any disparity in charges leads to cross-subsidisation, with KLIA passengers effectively paying for the services enjoyed by KLIA2 passengers.

From a macro perspective, the equalisation of PSC reduces the government subsidy payable by the government to Malaysia Airports Holdings Bhd (MAHB).

Under the current Operating Agreement entered into by the government and MAHB, the government has to pay MAHB a subsidy if the PSC is below a certain level based on a formula.

At KLIA2's current lower PSC level, the government has to subsidise MAHB over RM70 million per annum.

This effectively means taxpayers are subsidising the travels of those travelling from KLIA2 who can afford to travel to destinations beyond Asean.

Another way to look at it is that AirAsia is operating on government crutches since they get a competitive pricing advantage from the lower PSC, at the taxpayers expense.

Equalising the PSC only affects those travelling to destinations beyond Asean from KLIA2, that is, less than 5.0 per cent of Malaysia's passenger traffic.

All other travel categories are not affected.

An important point to note is that passenger traffic this year was not affected by PSC increases announced by MAVCOM last year.

On the contrary, traffic grew 10.2 per cent for the nine-months ended Sept 2017 versus 4.4 per cent in the corresponding period last year.

Besides, MAHB recently noted an increase in inbound traffic from China by 22.0 per cent for the seven months ended July 2017 compared with the previous year.

Therefore, in effect, PSC does not affect passenger traffic. - Bernama
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