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Loke: I disinvited Mavcom to post-cab meeting because they refused to execute Cabinet decisions

When the Ministry of Transport (MoT) announced the Cabinet's decision to disband the Malaysian Aviation Commission (Mavcom), it caused an outcry in the investing community.

Some quarters voiced their concerns over the loss of an independent body to regulate the operations of airports in the country, while others were more worried about the prospects of Malaysia Airports Holdings Bhd.

In a candid interview, Transport Minister Anthony Loke explains the rationale for the decision and why Mavcom was never consulted on many proposals made by MoT to the Cabinet.

 

The Edge: What is the rationale for the integration of the Malaysian Aviation Commission (Mavcom) and the Civil Aviation Authority of Malaysia (CAAM)?

Anthony Loke: We think that this is the right way forward because we have discussed and looked around and referred to other countries — what are the models of their regulators — and we found that actually, most countries only have a single regulator for aviation, that is their Civil Aviation Authority.

We want to empower CAAM. What’s more, after the US Federal Aviation Administration downgraded CAAM to Category 2 [for air safety rating], there is more reason to empower CAAM.

In the process of empowering CAAM, we think that this is the right time for us to absorb Mavcom into CAAM, and to make it a fully empowered and independent Civil Aviation Authority.

There were 33 findings in the downgrade — CAAM is perceived as a weak regulator. To really get back to Category 1, you need to address all these findings. Many people may ask, why not the other way around? My answer to that is the world authorities, the International Civil Aviation Organization (ICAO), recognises CAAM but not Mavcom.

Nobody recognises Mavcom as the authority for civil aviation. It is just an economic regulator created by the Malaysian government, and this model does not apply to many other countries.

 

Will there be any revamp in CAAM?

Definitely, we are looking at a total transformation of CAAM, not just in terms of strengthening the team — both the management and the technical team — but we are looking at how to strengthen its financial capability, so that it can pay better, to attract talent to the authority.

Since being corporatised in 2018, it has not been independent in terms of financials. It is considered ‘Badan Berkanun Tidak Diasingkan’, which means it became a statutory body but is not financially independent.

So, under that category, any pay scheme of its staff is still subject to JPA (Public Service Department), so it is tied to the government’s pay scheme.

 

How will the government ensure that CAAM is financially independent?

One way to increase CAAM’s revenue is to review our air navigation flight charges (ANFC). The rates have never been reviewed for the past 10 to 15 years. Our charges are much lower than those of Thailand and Indonesia — we are the lowest in the region.

That is one of the immediate measures that we are looking at, to increase the financial capability of our CAAM.

 

How much is it collecting now?

Now, CAAM is collecting less than RM120 million a year for everything, including ANFC and other charges like landing charges, which are also quite low, and pilot licensing and so on.

We need RM350 million [a year] to keep CAAM going at the current rate (pay scheme). So, to raise salaries, we need an upward revision from RM350 million. We are talking something like RM450 million to RM500 million, in terms of getting a better pay scheme.

 

As an independent statutory body, does it mean that CAAM would not need to abide by the Ministry of Transport’s policies?

When I say independent, it doesn’t mean that it will not follow the government’s policies. Independent authorities also need to fall in line with the policies of the government of the day.

We cannot allow a situation where the authority is allowed to do whatever it wants, disregarding the government’s policies. That would make the government of the day powerless. So, the government sets policies, and it is up to the authority to enforce them or to come up with a regulation or action plan to go along with the policies of the government.

To answer some of the critics who say that we are taking away the independence of Mavcom, that independence will be given to CAAM. We are not taking away that independence and putting it under my minister’s office.

 

Will Mavcom still be empowered to push through the Regulatory Asset Base (RAB) framework?

Until and unless Parliament passes the repeal of the Mavcom Act, it is still functioning as usual, so it is up to Mavcom what it wants to do — as we all know, it is independent.

I am not saying that we agree or disagree with the RAB model. What I am saying is that until the Mavcom Act is repealed, Mavcom is still free to continue its functions. So, there is nothing to stop it from pushing any regulations right now.

 

How would you describe your relationship with Mavcom? Mavcom said it was not consulted on passenger service charges and the merger.

We have a professional relationship. Previously, Mavcom was part of our weekly post-Cabinet (post-cab) meeting, so it is not true as far as PSC is concerned. Any decision by the Cabinet is communicated through the post-cab meeting.

Of course, I made a decision to disinvite Mavcom. We stopped the invitation in October. The reason was not because I was angry. The post-cab meeting is meant for execution, where I inform all the departments the Cabinet’s decisions for execution.

If you refuse to execute a Cabinet decision, there is no reason for you to attend our post-cab, so I stopped inviting them. But we still communicate with them.

The Cabinet made a decision to reduce PSC [for destinations beyond Asean] and that decision was not at the expense of MAHB (Malaysia Airports Holdings Bhd). MAHB has nothing to lose. Any shortfall is covered by the MARCS (marginal cost support sum) mechanism. But Mavcom did not gazette the new rate according to the Cabinet decision. So IATA did not follow the new rate. Of course, AirAsia went ahead to reduce the rate because it is not subject to the IATA system.

 

So Mavcom did not know about the merger?

I do not have to refer to Mavcom because it is a policy decision. Mavcom is the regulator. When we bring a Cabinet paper, the process is that we must circulate it for ulasan — for comments by the other ministries involved, particularly the Ministry of Finance, Ministry of Economic Affairs and also the A-G’s chambers — to see whether we are in line with the law and whether we have the power to do so.

The whole process was done internally, according to the government’s procedures and according to the Cabinet’s procedures.

Once the decision was made, immediately the same day I asked the [chief secretary to the government] to inform Mavcom.

Once we made the policy decision, it does not mean that [Mavcom] is closed down the next day. All of the processes — repealing the act, changing the functions of CAAM, placing people — will be discussed in the next few months.

There will be a special task force headed by [the chief secretary to the government] to work on all these amendments and Mavcom will definitely be involved in all of this. It is not true that we ignored them.

To sum it up, we have a professional relationship. I do not want to pretend that everything is cordial. Definitely, it is not so cordial. But we still maintain a professional relationship.

 

The investing public saw the merger between Mavcom and CAAM as political interference, and even said MoT is caving into corporate lobbying. What is your view on that?

I do not see why the merger of two government entities or two government bodies is seen in that light. As I said, our primary focus is to rationalise and to cut down bureaucracy. And of course we listen to the industry’s reaction and we know what the argument is going forward.

We do not just listen to one company. We listen to the feedback of the industry, and I think the aviation industry is not just about airlines.

There are also ground handlers involved. MRO (maintenance, repair and overhaul) companies, business jet operations and so on. It is not just about airlines. So, we are not listening to just one company but the entire industry.

And the consensus of the industry is that they want a more streamlined authority, better decision-making, faster decision-making and to cut down red tape and bureaucracy. Bureaucracy is a major complaint about Malaysia. What we are doing is to consolidate all these functions into one entity and to make our industry more competitive.

I hope all perspectives are being looked into. We are not listening to one company or one particular person. There is no such thing.

 

But it is seen that a particular party once lobbied for lower PSC rates and the government did that. It also complained about Mavcom and now the government is disbanding Mavcom.

We cannot stop people’s perceptions. But I think he was not the only one asking for a lowering of PSC. If you were to ask any passenger — are they willing to pay a higher PSC? No passenger is willing to pay a high rate.

When the government lowered the PSC, the same person also asked the government to cancel the departure levy. But we proceeded with the departure levy.

We actually lowered the PSC for klia2 [and the other airports] to offset the departure levy because we know low-cost airline passengers are price sensitive.

It is completely untrue that one person can get whatever they want. In this government, we do not listen to just one particular individual.

We get feedback from the industry. Time and time again, the PM (prime minister) has reminded us that this government must be business-friendly, because we believe that the private sector is the engine of growth for the country.

 

So, the MoT’s opinion is that there should not be a standardised PSC rate?

As a general principle, what we are looking at is a more dynamic pricing according to the quality of services enjoyed.

We want our airports to be more competitive and to be more dynamic in terms of charges, and operators should be more innovative in terms of pricing, which would probably result in a better operational environment for passengers.

 

Do you think we should build more low-cost carrier terminals? Or do you think we have too many airports in the country?

My view is that we should fully utilise our current airports, which is in line with our national transport policy. Of course certain airports can be expanded and upgraded.

 

What do you think about MAHB’s operations?

I think there are many operational challenges and issues that MAHB needs to focus on. The movement of people within KLIA has to be more efficient and that involves the Aerotrain, the baggage handling system and crowd management in the CIQ (customs, immigration, quarantine).

These are the general issues being highlighted by the travelling public. Sometimes, they wait longer than usual for their baggage to arrive and even for Malaysian passengers using the autogates, sometimes [the gates] get congested.

We would like to see more digitalisation in the operations and to make it more seamless and more integrated as far as our airport experience is concerned. There is room for improvement for MAHB and for any other airport operator.

 

Was Mavcom consulted when the Cabinet decided on the PSC cut?

Of course we asked them. But, as I said, sometimes when the Cabinet discusses matters, a decision is made during the discussion. We would then consult [Mavcom] on what to do and so on. We ask it what to do and what are the options.

When the Ministry of Transport (MoT) announced the Cabinet's decision to disband the Malaysian Aviation Commission (Mavcom), it caused an outcry in the investing community.

Some quarters voiced their concerns over the loss of an independent body to regulate the operations of airports in the country, while others were more worried about the prospects of Malaysia Airports Holdings Bhd.

In a candid interview, Transport Minister Anthony Loke explains the rationale for the decision and why Mavcom was never consulted on many proposals made by MoT to the Cabinet.

 

The Edge: What is the rationale for the integration of the Malaysian Aviation Commission (Mavcom) and the Civil Aviation Authority of Malaysia (CAAM)?

Anthony Loke: We think that this is the right way forward because we have discussed and looked around and referred to other countries — what are the models of their regulators — and we found that actually, most countries only have a single regulator for aviation, that is their Civil Aviation Authority.

We want to empower CAAM. What’s more, after the US Federal Aviation Administration downgraded CAAM to Category 2 [for air safety rating], there is more reason to empower CAAM.

In the process of empowering CAAM, we think that this is the right time for us to absorb Mavcom into CAAM, and to make it a fully empowered and independent Civil Aviation Authority.

There were 33 findings in the downgrade — CAAM is perceived as a weak regulator. To really get back to Category 1, you need to address all these findings. Many people may ask, why not the other way around? My answer to that is the world authorities, the International Civil Aviation Organization (ICAO), recognises CAAM but not Mavcom.

Nobody recognises Mavcom as the authority for civil aviation. It is just an economic regulator created by the Malaysian government, and this model does not apply to many other countries.

 

Will there be any revamp in CAAM?

Definitely, we are looking at a total transformation of CAAM, not just in terms of strengthening the team — both the management and the technical team — but we are looking at how to strengthen its financial capability, so that it can pay better, to attract talent to the authority.

Since being corporatised in 2018, it has not been independent in terms of financials. It is considered ‘Badan Berkanun Tidak Diasingkan’, which means it became a statutory body but is not financially independent.

So, under that category, any pay scheme of its staff is still subject to JPA (Public Service Department), so it is tied to the government’s pay scheme.

 

How will the government ensure that CAAM is financially independent?

One way to increase CAAM’s revenue is to review our air navigation flight charges (ANFC). The rates have never been reviewed for the past 10 to 15 years. Our charges are much lower than those of Thailand and Indonesia — we are the lowest in the region.

That is one of the immediate measures that we are looking at, to increase the financial capability of our CAAM.

 

How much is it collecting now?

Now, CAAM is collecting less than RM120 million a year for everything, including ANFC and other charges like landing charges, which are also quite low, and pilot licensing and so on.

We need RM350 million [a year] to keep CAAM going at the current rate (pay scheme). So, to raise salaries, we need an upward revision from RM350 million. We are talking something like RM450 million to RM500 million, in terms of getting a better pay scheme.

 

As an independent statutory body, does it mean that CAAM would not need to abide by the Ministry of Transport’s policies?

When I say independent, it doesn’t mean that it will not follow the government’s policies. Independent authorities also need to fall in line with the policies of the government of the day.

We cannot allow a situation where the authority is allowed to do whatever it wants, disregarding the government’s policies. That would make the government of the day powerless. So, the government sets policies, and it is up to the authority to enforce them or to come up with a regulation or action plan to go along with the policies of the government.

To answer some of the critics who say that we are taking away the independence of Mavcom, that independence will be given to CAAM. We are not taking away that independence and putting it under my minister’s office.

 

Will Mavcom still be empowered to push through the Regulatory Asset Base (RAB) framework?

Until and unless Parliament passes the repeal of the Mavcom Act, it is still functioning as usual, so it is up to Mavcom what it wants to do — as we all know, it is independent.

I am not saying that we agree or disagree with the RAB model. What I am saying is that until the Mavcom Act is repealed, Mavcom is still free to continue its functions. So, there is nothing to stop it from pushing any regulations right now.

 

How would you describe your relationship with Mavcom? Mavcom said it was not consulted on passenger service charges and the merger.

We have a professional relationship. Previously, Mavcom was part of our weekly post-Cabinet (post-cab) meeting, so it is not true as far as PSC is concerned. Any decision by the Cabinet is communicated through the post-cab meeting.

Of course, I made a decision to disinvite Mavcom. We stopped the invitation in October. The reason was not because I was angry. The post-cab meeting is meant for execution, where I inform all the departments the Cabinet’s decisions for execution.

If you refuse to execute a Cabinet decision, there is no reason for you to attend our post-cab, so I stopped inviting them. But we still communicate with them.

The Cabinet made a decision to reduce PSC [for destinations beyond Asean] and that decision was not at the expense of MAHB (Malaysia Airports Holdings Bhd). MAHB has nothing to lose. Any shortfall is covered by the MARCS (marginal cost support sum) mechanism. But Mavcom did not gazette the new rate according to the Cabinet decision. So IATA did not follow the new rate. Of course, AirAsia went ahead to reduce the rate because it is not subject to the IATA system.

 

So Mavcom did not know about the merger?

I do not have to refer to Mavcom because it is a policy decision. Mavcom is the regulator. When we bring a Cabinet paper, the process is that we must circulate it for ulasan — for comments by the other ministries involved, particularly the Ministry of Finance, Ministry of Economic Affairs and also the A-G’s chambers — to see whether we are in line with the law and whether we have the power to do so.

The whole process was done internally, according to the government’s procedures and according to the Cabinet’s procedures.

Once the decision was made, immediately the same day I asked the [chief secretary to the government] to inform Mavcom.

Once we made the policy decision, it does not mean that [Mavcom] is closed down the next day. All of the processes — repealing the act, changing the functions of CAAM, placing people — will be discussed in the next few months.

There will be a special task force headed by [the chief secretary to the government] to work on all these amendments and Mavcom will definitely be involved in all of this. It is not true that we ignored them.

To sum it up, we have a professional relationship. I do not want to pretend that everything is cordial. Definitely, it is not so cordial. But we still maintain a professional relationship.

 

The investing public saw the merger between Mavcom and CAAM as political interference, and even said MoT is caving into corporate lobbying. What is your view on that?

I do not see why the merger of two government entities or two government bodies is seen in that light. As I said, our primary focus is to rationalise and to cut down bureaucracy. And of course we listen to the industry’s reaction and we know what the argument is going forward.

We do not just listen to one company. We listen to the feedback of the industry, and I think the aviation industry is not just about airlines.

There are also ground handlers involved. MRO (maintenance, repair and overhaul) companies, business jet operations and so on. It is not just about airlines. So, we are not listening to just one company but the entire industry.

And the consensus of the industry is that they want a more streamlined authority, better decision-making, faster decision-making and to cut down red tape and bureaucracy. Bureaucracy is a major complaint about Malaysia. What we are doing is to consolidate all these functions into one entity and to make our industry more competitive.

I hope all perspectives are being looked into. We are not listening to one company or one particular person. There is no such thing.

 

But it is seen that a particular party once lobbied for lower PSC rates and the government did that. It also complained about Mavcom and now the government is disbanding Mavcom.

We cannot stop people’s perceptions. But I think he was not the only one asking for a lowering of PSC. If you were to ask any passenger — are they willing to pay a higher PSC? No passenger is willing to pay a high rate.

When the government lowered the PSC, the same person also asked the government to cancel the departure levy. But we proceeded with the departure levy.

We actually lowered the PSC for klia2 [and the other airports] to offset the departure levy because we know low-cost airline passengers are price sensitive.

It is completely untrue that one person can get whatever they want. In this government, we do not listen to just one particular individual.

We get feedback from the industry. Time and time again, the PM (prime minister) has reminded us that this government must be business-friendly, because we believe that the private sector is the engine of growth for the country.

 

So, the MoT’s opinion is that there should not be a standardised PSC rate?

As a general principle, what we are looking at is a more dynamic pricing according to the quality of services enjoyed.

We want our airports to be more competitive and to be more dynamic in terms of charges, and operators should be more innovative in terms of pricing, which would probably result in a better operational environment for passengers.

 

Do you think we should build more low-cost carrier terminals? Or do you think we have too many airports in the country?

My view is that we should fully utilise our current airports, which is in line with our national transport policy. Of course certain airports can be expanded and upgraded.

 

What do you think about MAHB’s operations?

I think there are many operational challenges and issues that MAHB needs to focus on. The movement of people within KLIA has to be more efficient and that involves the Aerotrain, the baggage handling system and crowd management in the CIQ (customs, immigration, quarantine).

These are the general issues being highlighted by the travelling public. Sometimes, they wait longer than usual for their baggage to arrive and even for Malaysian passengers using the autogates, sometimes [the gates] get congested.

We would like to see more digitalisation in the operations and to make it more seamless and more integrated as far as our airport experience is concerned. There is room for improvement for MAHB and for any other airport operator.

 

Was Mavcom consulted when the Cabinet decided on the PSC cut?

Of course we asked them. But, as I said, sometimes when the Cabinet discusses matters, a decision is made during the discussion. We would then consult [Mavcom] on what to do and so on. We ask it what to do and what are the options.

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