This article first appeared in The Edge Malaysia Weekly on November 13, 2023 - November 19, 2023

LOW-COST carrier MYAirline Sdn Bhd’s sudden suspension of its flight operations last month due to financial pressure was news that Malaysia’s aviation safety regulator, the Civil Aviation Authority of Malaysia (CAAM), did not see coming.

CAAM, which is responsible for the safety of all the planes that take off from Malaysian airports, suddenly found itself under a lot of pressure for granting MYAirline a two-year extension to its air operator’s certificate (AOC) just three days before the airline’s decision on Oct 12 to suspend its operations indefinitely.

In an interview with The Edge, CAAM CEO Datuk Captain Norazman Mahmud admits that the authority was in the dark about MYAirline’s financial predicament before that.

CAAM did not see anything amiss during its last safety audit on MYAirline that was carried out from May 29 to June 1 for the AOC renewal, or in the days right before the suspension, he says.

“We were not informed of MYAirline’s financial problems until the day [of the unexpected announcement],” he says, when asked whether the authority may have heard murmurs of the airline’s employees and suppliers experiencing delays in receiving their dues ahead of its suspension.

“CAAM has a reporting platform on our website; there are two types of reporting, one is a mandatory occurrence report for the aviation industry to report on accidents, serious incidents and occurrences, and the other is a voluntary report — which can come from anyone who would like to report on an actual or potential hazard to aviation safety. In the case of MYAirline, we did not receive any,” he says.

While late payment of an employee’s salary is not uncommon, all employers are obligated to pay the salaries of their employees at the latest by the seventh of each month. In the case of MYAirline, wages were given to workers before the end of the seventh day up until September, says Norazman. According to MYAirline’s interim accountable executive Datuk Seri Azharuddin Abdul Rahman, the airline has some 900 employees affected by the suspension of operations.

Still, the period between the authority’s safety audit in May and MYAirline’s sudden decision to suspend operations in October shows how lengthy the processes involved in the issuance and renewal of an AOC are — and how challenging it can be to get information from post holders or accountable managers at airlines.

“The audit was carried out in May. At that time, there were no findings to indicate financial distress. Everything was in order. After the safety audit, the operator will be given time to close findings, if any. We didn’t give the AOC renewal to MYAirline in advance of its expiry [on Sept 30, 2023]. But many things can happen within those five months. There are many things [such as] dealings with the lessors and changes in supply chains that can knock airlines off balance,” says Norazman.

“The challenge is to make the public understand the dynamics of the AOC process. It is not as easy as saying, ‘I want to open an airline; here is the certificate’. The process is long and very detailed,” he explains.

To improve the certification process, CAAM is now considering including a statement of facts in its safety audit process. “This means before we issue or renew the AOC of an airline, we have to make a declaration that nothing has changed since we carried out the safety audit to assess the capability and competency of the air operator in the areas of commercial air transport, operations and airworthiness,” he says.

Arising from the recent MYAirline saga, CAAM will step up its engagement with airlines after the unexpected suspension of service by MYAirline exposed significant gaps in communication between the authority and accountable managers and post holders at airlines, who are the “eyes and ears” for the authority.

“Moving forward, we will increase our engagement and strengthen communications with our nominated post holders. At CAAM, each AOC holder has a designated officer that takes care of them and we maintain a strong relationship with our nominated post holders through open communication,” he says.

“The accountable manager and nominated post holders — approved by CAAM — are basically the eyes and ears of the authority. Anything that happens with the airline, they will have to come and report to us. They hold a big responsibility. For example, the accountable manager must ensure the airline has the financial resources to conduct flight training, and maintenance is carried out accordingly.”

According to Norazman, the CEO or accountable manager, who has corporate authority to ensure all continuing airworthiness management activities can be financed, and nominated post holders — who are responsible for flight training, safety and quality assurance, operations and maintenance — typically serve as the primary point of contact with CAAM.

“The thing that I want to stress is the open communication between nominated post holders and CAAM. As the regulator, we are not here to hinder growth and development or become the barrier. We are here to facilitate the industry as we want to regulate a thriving aviation industry in Malaysia. We want to assist, guide and provide them suggested solutions while fully complying with regulations,” says Norazman.

One way he believes the authority can assist airlines is through the sharing of data. For example, all airlines in Malaysia are required to go through CAAM’s digital compliance questionnaire audit process to obtain their AOC.

“The questions in the compliance questionnaire are more detailed and structured. From the data collected, I can know how your performance was last year at my fingertips instead of rummaging through my files manually. We started this two years ago. We are also promoting other states to use this checklist as well.

“The compliance questionnaire is developed based on International Civil Aviation Organization (ICAO) standards. It covers nine audit scopes and includes more than 400 questions aimed at evaluating an organisation’s safety performance. This checklist will assess which scopes you are good in and which you need to improve. We can do a bit more analysing, and I can probably share this information with the other airlines.

“It takes more than a year to obtain mature data from our system, so if an airline had only been operating a year, the data may not be enough yet. To get mature data, you need at least five years to have a good understanding of the whole operations of all operators in Malaysia. We can grade the airlines with A, B or C. With that, we can adopt a risk-based approach to the various airlines,” he adds.

Norazman is of the view that the government’s proposed move to merge the economic and commercial functions of the Malaysian Aviation Commission (Mavcom) with CAAM is good in terms of efficiency and business process. CAAM is currently a statutory body under the purview of the Ministry of Transport, while Mavcom reports directly to the prime minister.

The merger involves the repeal of Mavcom’s founding Act, Mavcom Act 2015 [Act 771], and amendments to CAAM’s founding Act, CAAM Act 2017 (Act 788).

“We are now drafting the regulations. Transport Minister Anthony Loke Siew Fook reportedly said the bill on the proposed merger will be tabled to the cabinet during the first sitting of parliament next year. Once the bill is approved, we will execute the government policy,” he says.

Since May 2018, Mavcom has imposed a RM1 regulatory services charge (RSC) on all air travellers departing from airports in Malaysia. The purpose of the RM1 RSC is to fund Mavcom’s operations and allow the commission to function effectively as an independent regulator.

The RSC is expected to be maintained after the proposed merger.

Norazman also says plans are still on track to have CAAM improve the remuneration package of its employees and become financially independent. A lack of trained personnel was one of 33 issues raised by the US Federal Aviation Administration (FAA) that had led to Malaysia’s air safety oversight being downgraded to Category 2 from Category 1 in November 2019.

“We aim to become an independent body in terms of funding so that we can strengthen our own policy in terms of hiring and remuneration in line with the industry’s best practices. We are reviewing our human resources and finance policies, as well as change management to become an independent statutory body.

“We have tabled our new fees and charges to the transport minister. We have also engaged all the stakeholders. We had just completed a notice of proposed rule-making to seek stakeholders’ comments on our proposal on Oct 31. We are in the process of collating the feedback to present to the minister again. If approved, the minister will then present it to the cabinet,” he says, adding that the target to implement the new fees and charges is Jan 1, 2025.

“The fees and charges were last raised in 2016. Even with the hike, our current fee structure is still the lowest in the world,” he continues.

Norazman notes that the fee increase would be done in stages. “The first stage will be enough for us to sustain our operations. The proposed increase is to be on a par with our neighbours such as Singapore, Thailand and Indonesia.” 

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