Aviation sector may lose RM4.4bil after downgrade

Mavcom chief Operating Officer Azmir Zain (left) briefing the media on recommendations to the industry & impact of US FAA downgrade. With him is executive chairman Dr Nungsari Ahmad Radhi.

KUALA LUMPUR: The Malaysian aviation industry stands to lose RM4.4bil this year if the aviation authorities in China, Japan and South Korea bar Malaysian-based airlines from introducing new routes following the downgrading of Malaysia’s aviation safety rating in November last year.

The Malaysian Aviation Commission (Mavcom) said the three countries made up about 8.6% of the total seats of Malaysian carriers.

Several years ago when Thailand was downgraded by the United States Federal Aviation Administration (FAA), China, Japan and South Korea followed suit in barring Thailand-based airlines from flying charters and new routes in their countries.

Mavcom chief operating officer Azmir Zain said should Malaysia suffer the same fate as Thailand, the revenue at risk is RM4bil for Malaysian carriers and RM400mil for airports.

The US FAA downgraded Malaysia’s aviation safety rating to Category 2, after the Civil Aviation Authority of Malaysia (CAAM) failed the aviation safety oversight audit.

The direct impact was estimated to be approximately RM360.8mil on Malaysian airlines and RM10.8mil for aerodrome operators, from the ban on expanding or opening new routes to the US.

“And of course, this could damage our reputation and credibility, bearing in mind that Malaysia sits on the International Civil Aviation Organisation (ICAO) in Montreal, ” he told a briefing at Mavcom’s office here on the economic way forward for the civil aviation industry in Malaysia yesterday.

Among the main suggestion from its master plan recommendations was for the government to abolish its golden shares, such as in Malaysia Airports Holdings Bhd for a fairer and more competitive environment for the industry.

Meanwhile, the regulator also slashed its passenger traffic forecast this year from the range of 5% to 6% to 4.6% to 5.7% in light of the recent novel coronavirus (2019-nCoV) outbreak.

The passenger traffic size in Malaysia was 109.2 million last year, which was a growth of 6.4% from 2018.

Mavcom executive chairman Dr Nungsari Ahmad Radhi said they projected a robust increase in passenger growth prior to the outbreak but what was concerning was that much of the growth was domestic growth rather than international, which suggested that yields and profitability of airlines were not quite there.

“The fourth quarter figures indicated that Malaysia Airlines and AirAsia X continue to make losses. Even in the third quarter, AirAsia was making losses.

“That suggests that we need to do something drastic to improve connectivity of Malaysian destinations and airports, to help the airlines to actually get better deals, ” he said.

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