28 August 2017
THE Malaysian Aviation Commission (Mavcom) is looking to revamp the calculation of passenger service charges (PSCs) at local airports to ensure that they reflect the available facilities at the individual airports, as opposed to the current blanket rates.
This shift is in line with international practices, which typically peg PSCs to the construction cost of individual airports, says Mavcom chief operating officer Azmir Zain. The rationale is that costs are a quantifiable proxy for service levels.
“The logic here is if someone spends a certain amount to develop and maintain an airport, then the services should be of a certain level too,” he remarks. “That’s basically the methodology which we would like to base our charges on.”
Azmir declines to disclose a timeline for implementation but says some European countries took between three and four years to roll out such a mechanism. Mavcom is looking at a similar, if not shorter, timeline.
The new PSC-setting mechanism will work in tandem with a separate framework to incentivise the improvement of airport service levels.
Financial penalties will be imposed if an airport operator falls short of expected service standards.
According to Mavcom, the service levels encompass both passenger-related issues such as check-in queues, toilet cleanliness and security queues as well as airline-related issues such as the condition of the airport’s ramp and apron, gate allocation and response time.
“This framework is part of the Bill (to amend the Malaysian Aviation Commission Act 2016) which is set to be tabled in Parliament later this year,” says Azmir. “We hope to implement the pilot programme for this framework next year.
“Just as Mavcom has taken firm action against airlines that were in breach of consumer rights as stated under the MACPC (Malaysian Aviation Consumer Protection Code), the same holds true for airports that neglect their responsibility in delivering high standards of service,” he adds.
Mavcom, set up in March last year, had revised PSCs last October to standardise the rates for both terminals of Kuala Lumpur International Airport (KLIA).
The revision, effective Jan 1 this year, increased PSCs for domestic departures at all airports to RM11. PSCs for international departures increased to RM50 for klia2 and RM73 for all other airports, while a new Asean tier was introduced at RM35 for all airports.
Beginning January next year, the international PSCs at klia2 will be raised further to RM73, matching the rates for international departures at all other Malaysian airports.
The revision earlier this year was an interim measure and that has already been made clear to stakeholders, Azmir clarifies. The longer-term direction is to shed the current uniform charges.
Asymmetrical PSC looms
While the exact cost-based mechanism is still being worked out, it may lead to a reduction in PSCs at smaller airports while the larger ones may see increases as part of the current cross-subsidisation system.
At present, Malaysia Airports Holdings Bhd (MAHB) operates 39 out of 40 airports across the nation. MMC Corp Bhd’s unit, Senai Airport Terminal Services Sdn Bhd, operates the Senai International Airport in Johor.
Of the 39 airports under MAHB, five are international airports, 16 are domestic airports and 18 are short take-off and landing ports (STOLports) that provide connectivity to rural areas.
The current system sees a handful of profitable airports subsidising the operations of non-commercial airports that fulfil the government’s social obligation to provide connectivity to rural areas.
This means that smaller airports, whose lower costs would naturally imply lower service levels, may also see lower PSCs. In contrast, PSCs at larger airports, such as KLIA, may be higher to make up the shortfall.
A key question for the new mechanism is how the costs will be defined for calculation purposes. Will it be on a lump-sum basis or segregated according to landside and airside components?
“That depends on which philosophy, if you like, that we apply for this framework. For example, in a single-tier model, we would not separate airside and landside costs but in a dual-tier model, we would need to separate them,” says Azmir.
Airside costs are essentially those incurred for the terminal building and related processing of passengers and cargo. Landside costs refer to expenses associated with the aprons, taxiways and runways.
“What also comes hand in hand with a cost-based methodology is that the regulator would typically retain the right to determine [whether] the cost incurred by an airport operator is reasonable or not,” he adds.
For example, if an operator spends RM100 million to expand an airport and a Mavcom audit finds that a fairer costing would have been RM90 million, it can then set a PSC based on RM90 million and not RM100 million.
“What that does is that it ensures that the airport operator plans its capital expenditure properly, and the capex incurred needs to be reasonable as well,” says Azmir.
Original Source: themalaymailonline