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This article first appeared in The Edge Financial Daily on November 22, 2018

SEPANG: The government is looking at reducing the passenger service charge (PSC) collected by Malaysia Airports Holdings Bhd (MAHB).

“Lowering the PSC is on the agenda to make [air] travel more affordable for Malaysians,” said Transport Minister Anthony Loke Siew Fook.

“I can’t give you more details because the discussion is ongoing, but we want to sign a new OA (operating agreement) pretty soon and we hope to implement a new framework from next year onwards,” Loke told reporters at an AirAsia Group Bhd event yesterday. The PSC is paid by departing passengers and is collected by the airlines upon purchase of tickets. It is later passed on to MAHB upon completion of the flight.

The PSC rate, which is decided on by the Malaysian Aviation Commission (Mavcom), currently stands at RM73 for international flights beyond Asean after having been raised from RM50 on Jan 1. For travellers within Asean, the PSC has been lowered to RM35.

This was part of MAHB’s move to equalise the PSC, which is also called the airport tax, between Kuala Lumpur International Airport (KLIA) and klia2, where AirAsia operates.

AirAsia group chief executive officer Tan Sri Tony Fernandes has constantly argued that the PSC should be kept low in order to keep airfares affordable. However, MAHB has defended its PSC, highlighting that its rates are among the lowest in the region.

Mavcom has been reportedly working out on a regulatory asset-based framework for the PSC, which will peg rates to the costs of building and expanding airports. The commission was ordered by Loke earlier this year to review its PSC mechanism.

Fernandes has long complained that it is unjustifiable to charge the same rate of PSC for KLIA and klia2, arguing that charges should be proportionate to the services and facilities provided.

“Service is so poor at klia2, yet we have to pay the same, and Mavcom wants to give a monopoly like MAHB even more income by raising airport tax,” he tweeted earlier this month.

Meanwhile, Loke yesterday also said he had directed Mavcom not to over-regulate commercial airlines.

“Let the airlines take the risk. If there are any airlines that want to fly to new destinations or increase flight frequencies, [the government’s] role should be to facilitate that,” he said.

Mavcom and AirAsia have long been at loggerheads over various issues, including the setting of PSC rates and the approval of new flights for the low-cost carrier.

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