*Note: This story has been updated with input from i-Serve Online Mall Sdn Bhd*
KUALA LUMPUR (Jan 17): Even as the aviation industry is still struggling to recover from the devastating impact of the Covid-19 pandemic, Malaysia's civil aviation industry regulator has approved two new airlines to join the industry.
MYAirline Sdn Bhd (MYAirline), a newly-established ultra low-cost carrier (ULCC), is expected to be launched soon, according to sources.
A check on the Malaysian Aviation Commission's (Mavcom) website by theedgemarkets.com showed that the new ULCC, which was previously registered as Z9 Elite Sdn Bhd, has been granted conditional approval for an air service licence (ASL) by the commission on Dec 22, 2021. The licence is valid for 12 months from Jan 1 to Dec 31, 2022. An ASL allows the licence holder to conduct scheduled passenger and cargo services like those of Malaysia Airlines Bhd and AirAsia Group Bhd.
This is the second airline granted an ASL in the end of 2021 by the commission, which was established in 2016 to function as an independent economic regulator of the country's civil aviation industry.
It was reported less than two weeks ago on Jan 6 that Johor-based SKS Airways Sdn Bhd had also been granted an ASL by Mavcom, and also on Dec 22, 2021. SKS Airways’ ASL is effective for 36 months or three years from Jan 1, 2022 to Dec 31, 2024.
Meanwhile, MYAirline's filing with the Companies Commission of Malaysia (SSM) revealed that it has two million shares at RM1 per share, amounting to RM2 million in paid-up capital. The company named Zillion Wealth Bhd (88%), Trillion Cove Holdings Bhd (10%) and Rayner Teo Kheng Hock (2%) as its shareholders.
Its directors are Datuk Goh Hwan Hua, Datuk Abd Hamid Mohd Ali, Datuk Seri Azharuddin Abdul Rahman, Rayner Teo Kheng Hock and Jothi Prakash Murugan, the SSM filing revealed.
According to sources, Goh is believed to be the financial backer of the new airline venture. He is listed on SSM as the shareholder of both Zillion Wealth and Trillion Cove, bringing his stake in MYAirline to 98%.
Trillion Cove’s website also showed that Goh, who is the chief executive officer and director of the company, has a background in audit and corporate finance, and that he is an entrepreneur who has founded and built companies in the e-commerce, online business, e-ticketing, fintech, retail and tourism space.
Goh is also a 31.75% shareholder in i-Serve Online Mall Sdn Bhd, according to SSM filings.
It was reported last November that 22 premises linked to i-Serve Online Mall and its related affiliates across Kuala Lumpur and Selangor were raided by the National Anti-Financial Crime Centre with Bank Negara Malaysia (BNM) as the lead agency, along with the Securities Commission Malaysia (SC), Companies Commission of Malaysia, Malaysian Anti-Corruption Commission (MACC), Royal Malaysia Police (RMP) and CyberSecurity Malaysia.
The joint enforcement action resulted in the freezing of 45 bank accounts in seven banks and seizing of cash totalling RM118.7 million by the authorities, according to a statement dated Nov 15 on BNM's website. The central bank also said the action taken against i-Serve Online Mall were due to suspicion of committing various offences, including under the Financial Services Act 2013 (FSA) and the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA).
Subsequently, i-Serve Online Mall issued a statement via its lawyers three days later to request that BNM clarify its “vague and factually incorrect” statements. It contended that the statements made by BNM might mislead the public regarding the nature of the enforcement action taken against the company and its affiliates, and that the statements had severely damaged their reputations.
A spokesperson from i-Serve Online Mall, when contacted by The Edge, also refuted the cash seizure of RM118.7 million, saying that was "totally false".
"No cash was seized from the premises of the companies. The alleged amount that was referred to was in the accounts of various companies’ bank accounts that were frozen. The companies have not been served with any seizure notices. BNM as the regulatory authority should know the distinction that freezing is not seizure under AMLA," he said.
"We have given full co-operation to BNM and are trying to work things out so that the damage caused will not be irreparable. We only hope for fair treatment and justice according to law. In this post-pandemic economic recovery environment, enforcement agencies should not act in a manner that will cripple or kill businesses," he added.
On its website, the company describes itself as having started out in 2001 by providing smart card solutions and software development, before progressing to create kiosks for big names such as Eastman Kodak, Nokia, as well as AirAsia. It also says it has developed numerous mobile apps for conveniences such as bill payment and prepaid reloads, before setting foot in the financial technology industry.
Jothi, meanwhile, has a background in information technology (IT) and serves as a director of Trillion Cove.
Apart from Goh and Jothi, the three other MYAirline directors — Abd Hamid, Azharuddin and Teo — are aviation industry veterans.
Abd Hamid was previously the chief operating officer of Malaysia Airport Holdings Bhd between 1992 and 2016. Azharuddin was formerly the director-general of the Malaysian Civil Aviation Department (DCA) and former chairman of the Civil Aviation Authority of Malaysia (CAAM) between 2008 to 2018. Teo was previously AirAsia’s group head of sales and distribution between 2004 to 2020.
“MYAirline’s plan is to build an airline business in Malaysia and maybe challenge AirAsia for dominance,” a source told theedgemarkets.com.
The source said now is a good time to start a new airline as aircraft lessors are desperate for business, which makes for super cheap leasing rates, while pilots and flight crew who were retrenched during the Covid-19 pandemic could also be hired at reasonable salaries.
“A new airline starting from scratch means it has a fresh balance sheet which is not damaged by the pandemic,” the source added.
The entry of a new ULCC was first cited by CGS-CIMB Research in a report on Monday (Jan 17) as a potential derating catalyst for AirAsia.
"Credible information that a new ULCC is currently in the process of seeking regulatory approval to set up in Malaysia, having signed deals to lease two Airbus A320s at cheap leasing rates," CGS-CIMB Research aviation analyst Raymond Yap wrote.
He is reiterating a "reduce" call on AirAsia, with an unchanged target price of 14 sen, as he thinks it may be very difficult for AirAsia to recover from slipping into Practice Note 17 status last week, which has resulted in panic selling by investors, even though suspension and delisting are at least 21 months away.
AirAsia shares were lower by two sen or 3.23% at 60 sen at Monday's midday break, giving the group a market capitalisation of RM2.44 billion.
A320s also make up the majority or 168 of AirAsia’s current fleet of 210 aircraft, based on its annual report for 2020.
As for SKS Airways, which is wholly owned by Johor-based SKS Group and founded by low-profile businessman Alan Sim See Kiong, it is aiming to launch its first flight from Subang to Pangkor on Jan 25. It operates a fleet of DHC6 Twin Otter turboprop aircraft.
According to its website, SKS Airways focuses on domestic short-range flights to island-based and coastal resorts from major cities within Peninsular Malaysia.
Mavcom has projected "a best case scenario" for 2022’s total air passenger traffic of between 32.6 million and 49 million, which means a recovery of 30% to 45% from 2019's total air passenger traffic of 109.2 million. It estimated 2021's air passenger traffic to total 6.9 million to 7.8 million passengers.