AYISY YUSOF
KUALA LUMPUR: The government’s intervention in commercial decision-making via linked companies in the domestic aviation sector should never be made as a norm, said the Malaysian Aviation Commission (MAVCOM).
The commission said the government’s ‘golden share’ entitlement must be abolished to promote fair and competitive commercial environment for the local aviation sector.
MAVCOM chief operating officer Azmir Zain said the government’s roles within the aviation sector presently spread across multiple functions including being a policy maker and a regulator.
“The government is also a shareholder via various investment companies such as in Malaysia Airlines Bhd and Malaysia Airports Holdings Bhd (MAHB).
"The government’s active role in these companies could essentially blur its objectives at those multiple levels," he said during MAVCOM’s Economic Way Forward for the Civil Aviation Industry in Malaysia event here recently.
Quoting as an example, he said the government naturally takes policy decisions favouring companies in which it has shares in.
"Therefore it would be detrimental to non-government competitors within the industry as somewhat it blurs its (the government) role together with the board of directors (BODs) of the companies," he said.
Azmir pointed out that The Companies Act does play a fiduciary duty on members of the board of directors (BODs).
BODs of these government-owned aviation companies have a fiduciary duty to be responsible for the appointment of all its senior management of the companies.
"For a Ministry to step in to take on that role could potentially at odds with the idea of board being responsible for those companies,” he said.
Further, Azmir said appointments of senior management members would raise a question whether those appointments were done by the government or by the BODs.
MAVCOM executive chairman Dr Nungsari Ahmad Radhi said the commercial aviation decision should be made at a commercial level without having to consider political interference.
“Not to say political consideration is bad, but a commercial decision should be made at a commercial level,” he said.
Azmir said there will be a greater benefit for the aviation sector if there are opportunities for more airport operators in Malaysia over a long-term period.
“Our default position on many instances, competition is a good thing because it provides improvement in services level, financial and operational efficiency and market pricing,” he said in response to whether competition should be applicable in Malaysia’s airports sector.
Azmir said competition in any sector is good but Malaysia’s airport sector was inherently structured with the cross-subsidy mechanism to support unprofitable airports in the country.
“The airport industry in Malaysia has handful airport operators. There are 42 commercial airports in Malaysia. Out of that, 39 airports are being operated by MAHB under the Operating Agreement (OA) with the government,” he said.
Azmir said the process of introducing greater competition into the local airport sector should be done 'gradually and judiciously' due to the cross-subsidy mechanism.
“This is because only six airports are profitable and the remaining 33 airports are unprofitable. If competition were to introduce, investors would have cheery-picked only profitable airports, which could have detrimental effects on the existing airport operator (MAHB),” he said.
Azmir said MAHB’ investors were not just the government but also included domestic and foreign institutional as well as retail investors.
“We are very cognisant of investors’ confidence and it needs to be safeguarded in transitioning Malaysia’s airport industry from what it is today, which something has greater element of competition.
“It needs to be done more deliberately and with phases as opposed to introducing something drastic overnight,” he cautioned.