Losing out in aviation industry

I REFER to the news reports on the Transport Ministry’s announcement that the Cabinet had approved the application by AirAsia for the extra flights that it wanted.

This decision was a watershed event in that the Cabinet had to intervene to right what was supposed to have been done in the first place. But it was a sad day for the aviation industry in Malaysia, not because AirAsia got in on another route but because the Cabinet had to do what was essentially the job of the Malaysian Aviation Commission (Mavcom).

It’s sad because the aviation industry in Malaysia has been plagued by this incompetence and misdirection ever since Mavcom came into being. Its statement defending the rejection that it needs to facilitate an orderly growth while considering the risk of overcapacity means basically that it doesn’t have any valid points to substantiate that decision.

A general statement like that means Mavcom did not do any research or have any data to fall back on. AirAsia’s Tan Sri Tony Fernandes was right on the spot when he said that Mavcom is micro-managing the airline (let alone the industry).

It is common sense that no business wants to lose money, therefore the airline itself knows when and where it will send its planes to, so Mavcom would be better off to let the businessmen run the business. After all, the Companies Commission of Malaysia (SSM) doesn’t tell you that you cannot open another branch if you want to expand your business.

Since Mavcom came into being, the industry has seen more faux pas in terms of decisions than in all the years before. At least three new airlines have been forced to close and numerous applications have been rejected or delayed to the point of expiry and therefore not approved.

If, as Mavcom has stated time and again, it wants the travelling public to benefit, then let there be competition and not more regulation. Most of the time, Mavcom’s reason is the same old general statement that there is already enough capacity in the market. Now, wouldn’t the businessmen know whether or not there is enough capacity in the market before they made the decision to start an airline? Logically, they would have done market research since they are not going to spend millions into a losing business. It is not the job of Mavcom to decide whether you go into the business or otherwise.

The three airlines – EagleXpress Air, Rayani Air and Suasa Airlines – were closed down for various reasons by Mavcom. The mark of success of an authority is not counted by the number of businesses it closed down. In fact, it’s the opposite.

In the interest of competition, Mavcom should have looked for ways to encourage more players in the industry. By closing down these airlines, Mavcom failed to see the resultant effects of its action, namely the millions of ringgit lost, creditors not being able to get payments, staff losing jobs and families affected, and the paying public who had bought the tickets. That’s millions lost to the nation’s economy from the spin-off businesses as well.

What is also not seen because it was not announced is the number of applications that have been rejected by Mavcom or simply delayed in processing until they expired. The reason often given is that there already is enough capacity in the market.

As far as traffic rights are concerned, Mavcom should just decide on fair allocation to the various airlines in the country and not actually deciding whether to grant it or not. The government has gone through the trouble of getting the other signatory countries to sign the Air Service Agreement (ASA), so why should Mavcom decide again if our airline can fly to that country? As the case in point, for destinations within Malaysia, shouldn’t it be an open sky for a Malaysian airline?

Malaysia is one of the top tourism destinations in the world. While our three airlines are doing a great job in bringing in tourists, more could be done in this regard if Mavcom actually knows what it is doing.

The Pacific Asia Travel Association (PATA) reported 577 million arrivals into the region in 2015 and quite a substantial amount of that figure comes to Malaysia. The Asia-Pacific region is experiencing one of the highest growths in passenger demand in the world.

Chinese tourists are coming in droves to Sabah, Sarawak and other states; surely Malaysian-owned airlines can capitalise on that instead of letting airlines from other countries take the bulk of that business. This has been the case under Mavcom’s current policy, as can be seen by other airlines coming into Malaysia on charter services. Foreign airlines operating such charter services are Hainan Airlines, China Southern Airlines and Spring Airlines, among others. These airlines are operating charter services to Sabah, Sarawak and Peninsular Malaysia.

While it can be argued that the passengers are foreigners, we are losing our share of that market simply by not being able to enter it because of Mavcom’s policy.

The US deregulated their airline industry in the 1970s and most of the advanced economies have since deregulated their skies. Yet, Mavcom is going backwards in the approach to the industry in this country.

Instead of opening up the skies, Mavcom is in effect over-regulating the industry, therefore stifling its growth. This is in direct contrast to the government’s efforts to make Malaysia the aviation hub of the region. In fact, Malaysia is geographically blessed to be strategically located in the centre of Asean to make it an aviation hub.

Fernandes was right when he said that Mavcom should facilitate the growth of the industry. The people in the commission should come from the industry as they would know what it’s all about, where it should go and how to get there.

But what we have seen so far has been Mavcom acting as a consumer advocate (and not a very good one at that) while nothing has been done to advance the industry and make the leap forward. In fact, one can even be forgiven for asking if Mavcom actually knows its mandate. If it doesn’t know its mandate or how to deliver, then it might as well go the way of SPAD – or, in aviation lingo, “Let It Go The Way Of The Dodo”.


Subang Jaya

Letters , Aviation , Mavcom , AirAsia extra flights