AirAsia: High cost of unjustified PSC hike
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Unjustified price increases such as the hike in passenger service charge (PSC) could result in airlines being squeezed out of business and subsequently affect tourism arrivals, said low-cost carrier AirAsia. In a strongly worded statement titled “MAHB’s record profits come at a cost to the Malaysian economy and tourism industry”, the airline said the PSC hike imposed by airport operator Malaysia Airports Holdings Bhd (MAHB) will lead to unintended consequences when MAHB’s clients, who have no choice but to use its services, are eventually squeezed out of business.
“Then, everything will collapse – Malaysia’s tourism arrivals, billion in tourism receipts and revenues to MAHB’s own coffers (a fact it has failed to acknowledge). MAHB rewards itself with excessive monopoly profits, yet it provides the Malaysian public with embarrassingly low service levels,” it said.
The two parties have been in a row over the additional PSC imposed by MAHB of RM23 per passenger at klia2, in a move to equalise the PSC rate at klia2 and Kuala Lumpur International Airport (KLIA).
Last week, MAHB slapped AirAsia Group Bhd and AirAsia X Bhd (AAX) with a RM36.1 million lawsuit for refusing to collect the additional PSC and alleged arrears in PSC.
AirAsia X Malaysia CEO Benyamin Ismail said more than 90% of the “millions” of passengers departing from klia2 who fly with AirAsia will attest to the long walks to the departure gates, labeling klia2 as a passenger-unfriendly airport with inferior facilities and unjustified high charges.
He reiterated AirAsia’s complaints about the airport such as flight disruptions and cancellations due to major apron and runway defects, unscheduled closure of runways, ponding of water and fuel pipeline ruptures.
“We were sued after we refused to collect the extra RM23 that MAHB has imposed for the sole benefit of its shareholders. We will vigorously fight this suit. We will not be part of this scheme to burden the travelling public by making them pay more for below par services,” he said.
““We were sued after we refused to collect the extra RM23 that MAHB has imposed for the sole benefit of its shareholders.”
AirAsia noted that MAHB’s net profit more than tripled in 2017 to RM237 million from RM73 million in 2016, and estimates that MAHB’s returns on capital are well in excess of the level of the cost of capital set by regulators.
AirAsia Malaysia CEO Riad Asmat urged regulators and policy makers to rebuff the “unfair and unreasonable” attempt by MAHB to use its monopoly to enrich itself further by revisiting and rescinding the decision to raise the PSC.
“The overall tourism sector, one of Malaysia’s biggest revenue earners, and the interests of millions of Malaysians who have been able to fly because of the low fares pioneered by AirAsia, are being threatened by MAHB’s price hikes,” he said.
He challenged MAHB’s argument of needing more profits to operate smaller loss-making airports on behalf of the government, noting MAHB’s “exponential” growth in profits over the last three years even after taking into account losses in its Turkish operations.
“The additional RM23 to be collected will amount to more than RM100 million a year that will go straight to MAHB’s bottom line rather than to the government. MAHB will continue to be among the most profitable Malaysian companies for many years to come. But this will come at a cost to the wider Malaysian economy and at the expense of engines of growth such as AirAsia and AirAsia X,” he said.
Questions & Answers
Q.Why has AirAsia taken issue with the recent passenger service charge increase?
Why has AirAsia taken issue with the recent passenger service charge increase?
AirAsia believes the increase is unjustified and that MAHB is using its monopoly to raise prices for its own benefit, despite providing what AirAsia considers embarrassingly low service levels. They also argue it burdens travellers with higher costs for subpar facilities.
Q.What consequences does AirAsia predict if the passenger service charge hike remains in place?
What consequences does AirAsia predict if the passenger service charge hike remains in place?
AirAsia warns that the price increases could force airlines out of business, leading to a collapse in Malaysia's tourism arrivals and receipts. This would also negatively impact revenues that would otherwise go to MAHB's own coffers.
Q.What legal action has MAHB taken against AirAsia regarding the passenger service charge?
What legal action has MAHB taken against AirAsia regarding the passenger service charge?
MAHB has filed a RM36.1 million lawsuit against AirAsia Group Bhd and AirAsia X Bhd. This action was taken because AirAsia refused to collect the additional RM23 passenger service charge and for alleged arrears in PSC payments.
Q.What is AirAsia's main criticism of the service and facilities at klia2?
What is AirAsia's main criticism of the service and facilities at klia2?
AirAsia describes klia2 as a passenger-unfriendly airport with inferior facilities and unjustified high charges. They cite issues like long walks to gates, runway defects, unscheduled closures, water ponding, and fuel pipeline ruptures.
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