4 September 2019
The downward revision of the Passenger Service Charge (PSC) for airports excluding Kuala Lumpur International Airport (KLIA) will likely have a muted impact on Malaysian Airport Holdings Bhd (MAHB) in terms of financial impact as MAHB is entitled to a benchmark PSC.
MAHB remains bound by the benchmark rates set out in its operating agreement with the government and as it is still being compensated via the marginal cost support sum (MARCS).
This comes as the government announced on Aug 30, 2019 that the passenger service charges for international departures beyond Asean will be reduced to RM50 (previously RM73) for airports excluding KLIA Main Terminal.
The rates will take effect on Oct 1, 2019 until Dec 31, 2019 before the implementation of new aeronautical charges by the Malaysian Aviation Commission (Mavcom) from Jan 1, 2020.
“Based on our understanding, we expect the new PSC rates starting from January 2020 would be reflective of the service levels of respective airports under the Regulated Asset Base framework and hence, there could be a more favourable PSC for airports especially klia2,” explained the team at MIDF Amanah Investment Bank Bhd (MIDF Research)
“We believe that this would be an additional boost to the current travelling trend as we opined that tourism activity would remained intact even if the PSC for destination beyond Asean remained at RM73 for the said airports.”
It is noted that the PSC of RM50 for international departures beyond Asean ex-KLIA is still higher than the RM40 benchmark PSC rate for klia2 but lower than the RM80 benchmark PSC for other airports ex-KLIA.
Viewing from a net overall basis, MIDF Research said MAHB usually experiences a shortfall of PSC compared to the benchmark rates which is to be offset by the marginal cost support sum (MARCS) mechanism.
Another possible option for MAHB is an implementation of the user fee contra mechanism which was previously applied to Langkawi International Airport whereby an offset of lesser user fee cash flow to the government over a three to four year period, it added.
In other updates, MAHB’s second quarter of its financial year 2019 (2QFY19) recorded normalised earnings (after excluding one-off gains) of RM146 million. This brings the 1HFY19 normalised earnings to RM304.4 million.
Domestic traffic grew faster than international traffic. The 1HFY19 revenue – excluding construction revenue – rose by 9.2 per cent.
MAHB’s domestic traffic growth in Malaysia during 1HFY19 of 8.2 per cent y-o-y outpaced its international traffic growth of 1.6 per cent as airlines redirected more capacity to meet the domestic travel during the Hari Raya Aidilfitri festive season.
It was notable that the Aidilfitri holidays fell on and June 5 and 6 this year which coincided with the second week of school holidays, propelling higher demand.
“The international passenger mix remains favourable above 50 per cent. Although the international traffic did not grow as much as the domestic traffic 1HFY19, but it recorded the best ever first half performance in a given year.
“The occurrence of summer holidays for the United States and certain cities in Germany such as Berlin was an underpinning factor for the growth in international traffic.
“In fact the international passenger movements continued to retain more than 50 per cent of the passenger mix in Malaysia while the introduction of the passenger security service charges for international departing passengers helped to drive the 17.2 per cent y-o-y growth in PSC revenue during the period.”
Looking forward, Affin Hwang Investment Bank Bhd (AffinHwang Capital) forewarned of a ‘series of unfortunate events’ in 2019 which might cloud MAHB’s outlook ahead.
“Outlook is, however, a little less certain 2019 has been an eventful year for MAHB with plenty of moving parts. The discussions on Operating Agreements (OAs) with the government and the Regulated Asset Base (RAB) framework are still ongoing. Mavcom expects to implement the RAB on 1st January 2020.
“Prior to that, Mavcom will announce the new PSCs in September 2019.
“The discussion on the OAs, initially scheduled for completion in June 2019, is now expected to be finalised by the end of the year.”
Meanwhile, the system disruptions at KLIA last month have caused major inconveniences to passengers. Mavcom is monitoring and assessing the service levels at KLIA via the Airports Quality of Service Framework as well as the Malaysian Aviation Consumer Protection Code 2016.
Additionally, Transport Minister Anthony Loke had on August 30 announced that the Cabinet has decided to reduce the PSC for passengers using airports other than KLIA to destinations beyond Asean from RM73 to RM50.
He said the PSC rate reduction is made possible by balancing it with user fees.