MAVCOM refutes as more airlines speak out against being treated 'unfairly'

The Malaysian Aviation Commission (MAVCOM) has fired back at recent allegations made by Eaglexpress Air Charter (Eaglexpress) and Suasa Airlines. According to the New Straits Times, both airlines urged the government to reconsider the function of MAVCOM, which had "treated them unfairly", leading to losses amounting to "hundreds of millions of ringgit".

Eaglexpress had alleged that MAVCOM revoked its Aviation Service Permit (ASP) two years ago because it could not accumulate RM300 million cash reserves as required. Also, Suasa Airlines said MAVCOM had yet to provide the airline with an ASP, leaving it in "limbo". This resulted in Suasa Airlines suffering a loss of RM15 million and being forced to sell two of its five aircraft. Over 70 employees were also let go. Eaglexpress specialises in Hajj and Umrah charter services in addition to holiday and freight charters, while Suasa Airlines plans to operate chartered services to China, the Middle East and Langkawi.

In response, MAVCOM said in a statement on its website that Eaglexpress was granted an ASP for a period of 12 months on 30 August 2016, with specific conditions imposed to be complied by Eaglexpress within stipulated time frames. However, the airline was unable to comply with the conditions of the deadlines.

MAVCOM said it revoked the ASP as Eaglexpress failed to meet requirements such as converting current negative shareholders' equity to a positive position by 30 November 2016; increasing its cash level to RM million being equivalent to approximately two months of projected operating cost for 2016; as well as resolving all long-standing pending salary and relevant employee benefits payment by 30 October 2016.

The airline had also applied for a judicial review of MAVCOM’s decision to revoke its ASP, but the application was dismissed by the High Court on 14 August 2017, with costs of RM10,000 to be paid by Eaglexpress to MAVCOM.

Meanwhile, Suasa Airlines pleaded guilty on 9 January 2017 to carrying passengers for hire or reward on a non-scheduled journey between Kuala Lumpur and Langkawi without a valid ASP, and was fined RM380,000. MAVCOM had rejected Suasa Airlines’ application to operate the non-scheduled commercial flight on 22 July 2016 as it did not possess an ASP. However, the airline continued to operate the flight on the pretext of it being a "demonstration flight".

"Matters relating to the issuance, suspension and revocation of an Air Service Licence (ASL) and ASP come within the scope of responsibility of MAVCOM since its establishment on 1 March 2016," the statement read. It added that an entity looking to operate a commercial airline business is required to hold either an ASL or ASP issued by MAVCOM and an Air Operator Certificate issued by the Civil Aviation Authority of Malaysia. Airlines that do not possess a valid ASL or ASP are not permitted to perform a commercial air service operation in Malaysia.

"This case of Eaglexpress, as well as the earlier case with Suasa Airlines are clear indications to potential and current industry players that operating an airline (chartered or scheduled) is extremely challenging and requires a high degree of planning, financial depth, operational know-how and execution competency," MAVCOM said. As such, a "robust" commercial foundation and depth are necessary prerequisites to be a player in this industry, regardless of whether it is an ASP or ASL holder.

MAVCOM added that it is responsible for ensuring enterprises participating in the industry are properly equipped and ready, in order to safeguard consumers’ safety and interest. As an independent economic regulatory body, its mission is to promote and ensure a commercially viable, consumer-oriented and resilient civil aviation industry that supports Malaysia’s growth. It also stressed the importance of complying with laws and regulations, adding that it is necessary for airlines to have all regulatory approvals in place before operating, as required not only by Malaysian laws but also in compliance with international legal requirements and practices.

"Stringent steps taken by the Commission is ultimately to ensure a resilient aviation industry as well as to safeguard consumers, and therefore the Commission is firm in its standing and will take actions on offenders that do not comply with the industry laws and regulations," MAVCOM added.

This comes shortly after AirAsia group CEO Tony Fernandes called out MAVCOM for the standardisation of the passenger service charge (PSC) between Kuala Lumpur International Airport (KLIA) and klia2. Fernandes said in a LinkedIn post that MAVCOM was established to support consumer rights and oversee the civil aviation industry to support Malaysia’s economic growth. But since its establishment, consumers have paid additional taxes and charges without reaping benefits. Also, Malaysia is now one of the few ASEAN countries with a decline in tourism, he said.

He also said that no airports are built the same and a “one-size fits all” approach should not be adopted. Therefore, imposing equal charges for different levels of facilities and services is “discriminatory”. Fernades said this puts the less equipped airport at a disadvantage and more importantly, affects the low-cost market who are much more sensitive to price variations.

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