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Malaysia reduces service charge
September 6th 2019
IATA upset the charge change does not include Kuala Lumpur’s main terminal. Read More »
When a door closes, a window opens. So perhaps for aviation, when a tax goes up, a charge goes down.
In early August, Malaysia announced increased international departure taxes, with the objective of benefitting domestic tourism. Last week, Malaysia announced the passenger service charge would decrease at KLIA2 and other airports, but the main terminal at Kuala Lumpur, mostly accommodating full-service airlines, will not benefit from the reduced charge.
The decrease only applies to non-ASEAN international flights. It will decrease from MYR73 (US$17) to MYR50. Domestic and ASEAN charges will remain at MYR11 and MYR35 respectively. The change is effective from October 1 and passengers who have paid the higher charge can request a refund.
The reduced charge is a win for AirAsia, which has long sought to have differentiated charges based on infrastructure. Transport Minister, Anthony Loke, acknowledged this when he said “KLIA is a premium airport. There must be a difference between a premium airport and other airports. I think most people can agree that the level of infrastructure is different.”
The International Air Transport Association (IATA) said the Malaysian government would “discriminate” by not applying the reduced charge to KLIA’s main terminal. IATA’s membership mostly comprises full-service airlines. The AirAsia Group is not a member. “The government is creating an uneven playing field for airlines as well as cross-subsidization of the other airports/terminals by the users of KLIA,” said IATA Asia-Pacific vice president, Conrad Clifford. IATA noted that PSC reduction “is positive for most travellers in Malaysia”.
The Malaysian government did not explicitly say the reduced passenger service charge was to compensate for the impact of the higher tax, but many interested parties are making the connection. “If the intention is to offset the increased charges due to the departure levy, which was introduced on September 1, the more straightforward way is to remove the departure levy altogether,” Clifford said.
Loke said the reduced charge is the first step in a more sophisticated charging scheme to be developed by the Malaysian Aviation Commission (MAVCOM) and be submitted to the prime minister.
“In the past, across all the airports in the country, we paid only one rate. But we are moving towards a situation where you have different charges according to the infrastructure of the airport,” Loke said.
IATA also took issue with Malaysia’s decision because it was announced by the minister instead of MAVCOM. “The government also has undermined MAVCOM’s credibility as a result. MAVCOM is the appointed regulator for airports and has the mandate and authority to determine airport charges,” Clifford said.
The share price of airport operator, Malaysia Airports Holdings Bhd (MAHB), fell by 6% on news it would collect lower charges. MAHB’s stock witnessed the lowest decline of the day on the market.
