KUALA LUMPUR — Malaysian authorities announced on Monday a reduced aviation passenger service charge to boost regional traffic. The initiative could benefit airport operators, carriers, and other aviation players, and pressure rival hubs in the region to follow suit as it develops a single aviation market.
ASEAN destinations are at present categorized along with other international destinations with a passenger service charge (PSC) of 65 ringgit. As of January, travelers flying full-service carriers from major airports in Malaysia to the other nine member countries of the Association of Southeast Asian Nations (ASEAN) will pay 35 ringgit ($8.3) as a PSC, according to the Malaysian Aviation Commission. The commission said the new rate will hasten economic integration within the bloc and promote connectivity.
“Enhancing intra-regional connectivity within ASEAN and its sub-regional grouping will benefit all ASEAN nations through enhanced trade, investment, tourism and development,” it said.
The commission added that an ASEAN PSC should also open up secondary gateways within the region, and increase inbound travel to Malaysia.
In an attempt to create a level playing field between the two competing main gateways, Kuala Lumpur International Airport and KLIA2 (which caters mainly to budget carriers), the PSCs for domestic and ASEAN destinations are being fixed at 11 ringgit and 35 ringgit respectively at both.
“Our customers now have the freedom to choose whatever terminal they wish in Kuala Lumpur,” Peter Bellew, group chief executive of Malaysia Airlines said in a release, indicating that the national flag-carrier will initiate operations from KLIA2.
KLIA2 is the home base of AirAsia, the region’s largest budget carrier by fleet size, and it accounts for most of the flights from the terminal. Malaysia Airlines stands to gain from the cheaper PSC for international flights at KLIA2, which is 50 ringgit compared to 73 ringgit charged at KLIA.
Malaysian authorities said there are plans to equalize the international PSC at both terminals in a year’s time. Meanwhile, the 56% increase in PSC for international travel at KLIA2 will have limited impact on AirAsia, as two-thirds of its flights are within ASEAN, according to Aaron Kee, analyst at Affin Hwang Capital.
But AirAsia appears displeased with the move to create parity between the terminals, which it argues cater to different traveler categories.
“The customers at KLIA enjoy far superior services whereas the services at KLIA2 are not entirely satisfactory which does not give rise to a level playing field,” AirAsia said in a press release.
Analysts said Malaysia Airports Holdings, the dominant national operator, stands to gain most from the PSC revision, which was last adjusted in 2011. Kenanga Research recently upgraded Malaysia Airports stocks from the middling “market perform” to “outperform” on the premise of PSC changes next year.
Malaysia’s adjustments may be followed elsewhere in ASEAN even though Malaysian airports already have a competitive edge, according to the commission. Compared to Malaysia’s 73 ringgit, the PSC for international travel at Bangkok’s Suvarnabhumi International Airport is 84 ringgit, and 102 ringgit at Singapore’s Changi Airport.