This article first appeared in The Edge Malaysia Weekly on August 10, 2026 - August 16, 2026

MALAYSIA is preparing a major overhaul of its drone regulations, with a low-altitude economy (LAE) framework set to be rolled out in the fourth quarter of this year. The framework aims to bring an estimated 400,000 drones under a single regulatory regime and pave the way for the introduction of advanced air mobility vehicles such as electric vertical take-off and landing (eVTOL) aircraft and air taxis into the civilian airspace.

Led by the Civil Aviation Authority of Malaysia (CAAM), the blueprint will replace what the aviation regulator describes as “bits and pieces” of rules governing unmanned aircraft with a comprehensive framework that supports a much broader aviation ecosystem than drones alone.

“When people think of LAE, all they think of is drones. Actually, it’s more than that,” CAAM CEO Datuk Captain Norazman Mahmud tells The Edge in an interview.

He says the regulator’s immediate priority is to bring drone operators into a central registry, estimating that only about 200,000 drones are currently registered while another 200,000 remain outside the system.

“The first step is to get all drones registered with CAAM. Before we deal with anything, we have to know the scale of this industry.”

CAAM released a public consultation paper last week, inviting feedback from industry players, government agencies, academia, professional bodies and the public before finalising the framework.

“We don’t want good regulations that people cannot follow, making them useless. The regulation is there to ensure safety, but it also has to be sustainable,” says Norazman.

Malaysia already regulates specific drone activities, including agricultural applications, drone light shows, surveillance trials and remote pilot training. But those rules have developed independently rather than as part of a unified regulatory framework, Norazman explains.

Although existing penalties for illegal drone operations remain steep — up to RM50,000 in fines or three years’ imprisonment for individuals and RM100,000 for organisations — he says CAAM’s focus is on improving awareness and compliance rather than imposing punishments.

“First, we want to make everybody aware there are regulations to follow and how to comply with them. We have regulations for the use of drones, but they are in bits and pieces.

“Our main task as the regulator is to come up with a blueprint that will enable the safe integration of drones and advanced air mobility into the national aviation ecosystem,” he says.

CAAM currently has 719 registered unmanned aircraft operators, including government agencies, with most conducting commercial operations. Commercial eVTOL operations have yet to begin in Malaysia, meaning there is no official register of operators or developers.

As a result, proof-of-concept trials for drone deliveries and air taxis are only expected to begin in the first quarter of 2027.

Regulation is only one part of the ambitions. The government also wants to establish the country as a producer — rather than simply a consumer — of unmanned aircraft technology .

Norazman argues that Malaysia already possesses many of the necessary building blocks, including a globally significant semiconductor industry, telecommunications infrastructure and an expanding network of data centres.

“We don’t want to be just the user. We also want to be the producer.

“Our country is prepared in terms of infrastructure. We have telecommunication towers, data centres and we are one of the top chip-producing countries in the world,” he says.

Drawing a parallel with the automotive industry, he says the country has experience assembling vehicles through completely knocked down (CKD) programmes and believes similar capabilities can be applied to unmanned aircraft manufacturing. “It is only that we have to coordinate better.”

He points to Australia’s growing adoption of agricultural drones as an indication of how quickly the technology can reshape industries once regulatory frameworks mature.

To support that growth, CAAM expects to launch a digital unmanned aircraft system traffic management platform by the end of the year.

The RM10 million system, being developed with Datasonic Technologies Sdn Bhd, a unit of NexG Bhd (KL:NEXG), and operated by Belgium’s Unifly, is designed to replace the current manual approval process with near-instant flight approvals for low-risk drones weighing 250g or less, while providing real-time monitoring and coordination of drone operations.

The drone initiative comes as CAAM continues to reshape itself following its merger with the Malaysian Aviation Commission in August 2025 and its transition into a financially independent statutory body.

As at July 2026, CAAM employed about 1,510 people nationwide, up from 1,448 at the time of the merger. The headcount is expected to reach around 1,600.

Norazman says the authority has filled most critical leadership positions, achieving an 82% fill rate across management roles, while continuing to recruit air traffic controllers (ATCs), engineers and other specialist aviation personnel.

“Recruitment efforts remain focused on critical operational, technical and regulatory positions that directly support aviation safety oversight, air navigation services, enforcement and regulatory compliance,” he says.

Training an ATC takes around 18 months.

“Today, our staff strength is in line with the requirements of the International Civil Aviation Organization. We don’t want to return to those times,” he says emphatically, referring to CAAM’s downgrade to a Category 2 air-safety rating by the US Federal Aviation Administration in 2019 after deficiencies were identified in technical expertise, trained personnel, record-keeping and inspection procedures. It took CAAM three years to regain its Category 1 rating.

Norazman says the move to self-funding has also given CAAM greater flexibility to benchmark salaries against industry standards, particularly in specialised technical and regulatory roles where competition for talent is intense.

Alongside remuneration reforms, the authority has introduced leadership development programmes, succession planning, graduate initiatives and expanded training opportunities.

The result is a workforce attrition rate of just 1.8% this year despite the organisation’s ongoing transformation, Norazman says.

CAAM’s finances have also improved significantly. Revenue tripled to about RM400 million in 2025 following upward revisions to the Civil Aviation (Fees and Charges) Regulations in January that year, reducing the regulator’s reliance on annual government funding of between RM150 million and RM200 million.

The next review of aviation fees is scheduled for 2028.

“This periodic review ensures that CAAM’s fees remain relevant, sustainable and aligned with evolving regulatory responsibilities, industry developments and the cost of delivering effective aviation oversight,” says Norazman.

On 2026’s revenue, Norazman says CAAM continues to closely monitor developments arising from geopolitical events, including any potential impact on airline operations and air traffic. While temporary adjustments in airline capacity may have some effect on certain revenue streams, the overall impact on CAAM is expected to be manageable at this stage, he says.

“Malaysia’s aviation sector remains fundamentally resilient, supported by continued growth in passenger demand, strong regional connectivity and the gradual recovery of airline operations in recent weeks. CAAM will continue to monitor traffic trends and work closely with industry stakeholders to ensure that any emerging risks are managed appropriately while maintaining the safety, security and efficiency of the national aviation system,” he adds.

While Malaysia’s carriers have improved their flight punctuality, the industry still falls short of CAAM’s target of having at least 85% of flights depart within 15 minutes of schedule.

Industry-wide on-time performance (OTP) for domestic flights rose from 77% in 2025 to 81.9% between January and May 2026, while international OTP climbed from 71% to 82.4% over the same period.

“Firefly, Malaysia Airlines and AirBorneo have consistently achieved or exceeded the 85% benchmark for their respective operations, while AirAsia and Batik Air have also recorded steady improvements compared with the previous year,” says Norazman.

He contends that the suspension of budget carrier MYAirline Sdn Bhd in 2023 and regional airline SKS Airways Sdn Bhd in 2025 reflected company-specific challenges rather than broader weaknesses in Malaysia’s aviation sector.

“These events serve as a reminder that the aviation sector requires an absolute alignment between an operator’s capital depth, its business model and available infrastructure,” he says.

“Currently, the global aviation landscape is navigating a demanding macroeconomic environment, particularly with geopolitical factors affecting global fuel pricing and airspace routing. Local operators are continuously adapting by adjusting capacity and optimising networks to manage these cost pressures.

“From CAAM’s standpoint, our post-merger approach has heavily shifted towards closer, more constructive engagement with airlines. We are working closely with carriers to build greater operational and financial transparency. This allows us to facilitate the industry where possible, identifying potential bottlenecks or market pressures early on. By bridging our technical and economic purviews, our enhanced oversight mechanisms are designed to support long-term industry stability and financial discipline, helping operators better navigate external shocks,” he says.

Norazman stresses that Malaysia remains open to new airline entrants, but only operators capable of meeting stringent technical and financial requirements will be granted approval.

“We have strict criteria: any applicant must clear a rigorous, dual-layered technical and financial assessment as our priority is fostering stable, well-capitalised players that can sustainably support Malaysia’s long-term industry growth and connectivity.”

Meanwhile, consumer complaints fell slightly in the first half of 2026 compared with the second half of last year, according to CAAM. Flight cancellations and service disruptions remain the main source of complaints, stemming from issues such as aircraft availability, technical faults, crew shortages, weather, airport congestion, air traffic constraints and other operational or safety requirements.

Norazman says the regulator’s approach is built on transparency and closer engagement with airlines and airport operators rather than enforcement alone.

“We have to be transparent. Whatever we do, we have to build trust,” he notes. “Today, in terms of collaboration [with airlines and airport operators], I would say it is very good. Since taking the helm [in 2023], I have been open to meeting with them.”

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