MAHB Clarifies on Airport Passenger Service Charge and Condition of Use

Malaysia Airports Holdings Berhad (MAHB) wishes to provide some clarification on the matter of Passenger Service Charge (PSC) and Condition of Use (COU) relating to the following:

• The civil suits filed by Malaysia Airports (Sepang) Sdn. Bhd, (MASSB) against AirAsia for the outstanding Passenger Service Charge (PSC); and
• The recent notice of claims served by AirAsia on MASSB for an approximate amount of RM480 million.

While bearing in mind that the matter of the PSC dispute is currently under judicial consideration on the merits of the case and therefore subject to the sub judice rule, we wish to clear any misconception or confusion arising from the matter, as well as to improve awareness on the matter, especially considering the high media coverage in recent weeks.

PSC rates are not set, fixed or controlled by MAHB or MASSB

• PSC rates in Malaysia are under the purview of the Malaysian Aviation Commission (MAVCOM) - an independent economic regulator to the civil aviation industry – as stated under Section 46 of the Malaysian Aviation Commission Act 2015.
• PSC is charged on departing passengers at all airports in Malaysia except at the Short Take Off Landing ports (STOLports) which are located in remote areas. PSC is used to partially cover the numerous operating and capital expenditures for the improvement and maintenance of airport facilities and services.
• It is common practice in the aviation industry for PSC to be collected by the airlines from the departing passengers upon purchase of their flight tickets and thereafter, the PSC is paid to the airport operator following completion of the flight. In fact, there are some airports in the world such as Sydney and Melbourne, Australia that charge both departing and arriving passengers.
• MAHB operates 39 airports nationwide, of which 18 are STOLports such as in Bario, Bakelalan, Marudi, Long Akah, and Mukah to name a few. At these airports, PSC is waived for about 160,000 passengers who use the STOLports a year as part of our corporate social responsibility in helping provide connectivity and accessibility to basic needs such as education, healthcare and economic opportunities for the rakyat at remote areas.

Malaysia’s PSC rates remain among the lowest regionally and globally

• In November 2017, MAVCOM had announced the final step for the full equalisation of PSC across all airports in Malaysia which was to take effect on 1 January 2018. This last step was to equalise the PSC for non-ASEAN international flights at klia2, the second terminal of KL International Airport (KUL) to be the same with those at KLIA Main Terminal in KUL and other airports in Malaysia i.e. from RM50 to RM73.
• The rationale for the equalisation is stated by MAVCOM as follows:
  • The need to move towards a more internationally accepted cost-based mechanism for charging PSC, which is consistent with the principles outlined by the International Civil Aviation Organization (ICAO);
  • The need to lower the subsidies at klia2;
  • The need to facilitate air traveler welfare; and

  • The fact that PSC rates in Malaysia for both domestic and international departures will remain amongst the lowest regionally and globally. Comparison can be made with similar hubs within the region such as Changi Airport (SIN) in Singapore, Hong Kong International Airport (HKG), Suvarnabhumi International Airport (BKK) in Bangkok, Soekarno-Hatta International Airport (CGK) in Jakarta, and Ninoy Aquino International Airport (MNL) in Manila.

    International PSC Comparisons Among Similar Sized Airports Within the Region

    Airports

    International PSC

    KUL

    ASEAN

    NON-ASEAN

    RM35.0

    RM73.0

    SIN

    RM143.50

    HKG

    RM163.40

    BKK

    RM91.60

    CGK

    RM67.60

    MNL

    RM58.70

    Note: Currency conversion rates as at 2 Feb 2019

• In fact, when we benchmark Malaysia’s charging models with other airports regionally, it can be seen that airports charge the same PSC rates for all its terminals regardless of operating airlines. For example, both Suvarnabhumi International Airport (Bangkok) and Don Mueang International Airport (Bangkok) charge the same rate despite the clear distinction between full service and low-cost operations respectively at the two airports. The equalised PSC for Don Mueang and Suvarnabhumi airports is BHT 700 or RM 80, for all international passengers (ASEAN and non-ASEAN).
• It is worth bearing in mind that the last step in the equalisation had only affected fewer than 4.5 million passengers travelling to Non-ASEAN international destinations, 70% of which are foreign nationals.
• MAVCOM had published a paper giving out the context, background and reason of the equalisation in their consultation paper dated 24 August 2017 titled “Passenger Service Charges at Airports in Malaysia – Consultation Paper”. We strongly urge members of the public to view the paper on MAVCOM’s website at https://www.mavcom.my/wp-content/uploads/2017/08/Passenger-Service-Charges-at-Airports-in-Malaysia-%E2%80%93-Consultation-Paper-Final.pdf

MAHB implements PSC at the gazetted amount

• MAHB had implemented the PSC revision as per the gazetted amount by MAVCOM.
• It is worth noting that this was also done when the PSC rate for ASEAN was revised down from RM65 to RM35 in 2017 for all international departing passengers to ASEAN countries at all airports in Malaysia. This makes us the only country in the region that charges a lower rate for ASEAN international passengers. The ASEAN international passengers at klia2 that have benefited from the lower RM 35 PSC charges make up 57% of the total international passengers at klia2.
• MAVCOM had also stated the equalisation will facilitate an environment of fairer competition between airlines operating in Malaysia, as well as allow Malaysia to be better aligned to international guidelines, including with the International Civil Aviation Organisation (ICAO) principle of non-discriminatory pricing at airports.
• The Board of Airline Representatives (BAR) – an organisation representing the majority of full-service carriers operating in Malaysia - had also registered its dissatisfaction over AirAsia’s disregard of the gazetted rate, stating that they find “[the] practice abhorrent, discriminatory and totally unacceptable as it creates an unlevel playing field”. Currently all other airlines operating at klia2 such as India’s largest low cost carrier IndiGo collects and pays the PSC rate of RM73 for Non-ASEAN international passengers.

Conditions of Use 2017 (COU 2017) is the contract between MASSB and all airlines operating from KLIA Main and klia2

• The COU 2017 is applicable to all airlines operating at both terminals in KUL (including AirAsia). The contracts states that the PSC rates payable are subject to any revised MAVCOM regulations.
• It is also stated in the COU 2017 that we may close part of the airport or suspend, interrupt or shutdown airport services and facilities if any repair, maintenance or upgrade of the facilities is needed provided reasonable prior notice is given and reasonable steps are taken to minimise the impact. In the event of such a situation, we will not be liable for any loss or damages.
• The COU 2017 also specifies that any dispute between the parties are to be handled at the exclusive jurisdiction of the courts.
• The COU 2017 can be found on MAHB’s website and the public is encouraged to refer to the same at https://www.malaysiaairports.com.my/sites/corporate/files/2018-09/pdf_cou_klia%20%28final%29_20012017_1493650349.pdf
• It should further be noted that such Conditions of Use are used to govern the usage of airports all around the world, including at Singapore’s Changi Airport and London’s Heathrow Airport to name a few.

We hope the above explanation provides better clarity on and context to the matter. We are optimistic that these matters can and will be resolved - the first of which would be the matter of jurisdiction in resolving such matters. The jurisdiction on contractual matters rests solely with the courts and this is being dealt with in court at present.

It is in the best interest of our shareholders for MAHB to recover through proper means the loss of an average of about RM7 million per month due to AirAsia charging a lower amount than the gazetted rate. The disparity of approach to PSC and AirAsia’s action is also distorting competition to the effect that it impacts our ability to attract new airlines into the country and lessen the efforts in making Malaysia into a strong aviation hub.