Question: What is the update on the passenger service charges (PSC)? Has Air-Asia talked to the Malaysian Aviation Commission (Mavvcom) or the Transport Ministry?
Answer: We still have not heard formally from the various authorities. I think Mavcom is the right organisation to be able to make the right announcements. So far, they have not made any announcements yet. I think what you saw in the papers last week was probably speculation. I think we should just wait for that announcement from Mavcom.
Q: But the Transport Ministry had said the new PSC rates will be implemented by January 1 next year?
A: That is what we saw in the papers. But again, we have not seen anything from Mavcom. If it’s true that the new PSC will be implemented next year like we have said in our press release... we hope it is something that will not impact the number of tourists coming in because we really need to have more tourists coming in, especially this year and in the next five years.
We have seen a lot of competition in the region where countries like Thailand and Indonesia are aggressively trying to pursue tourists, and among all the Asean countries, Thailand probably has the highest growth in terms of the number of passengers or tourist traffic coming in.
They are still very hungry for more. So as you can see they carried out a lot of initiatives.
If you look at the kind of tourists that you want, everybody wants to have a certain percentage of Chinese tourists into their country. Therefore, a Chinese tourist would have a choice — do they want to fly to Thailand or would they want to fly to Malaysia, Indonesia or Singapore?
This is where everybody in this region is trying to grab that attention of the Chinese tourists to have them come into the traffic.
I actually have the statistics when the guys (AirAsia) went to the Japan Association of Travel Agents (expo) for a presentation by the Asean secretary-general. Among all the countries in the region, Malaysia is the only one that has come down in terms of international visitor arrival numbers.
Look at Thailand, even at 20 per cent growth, the Minister of Tourism was unhappy because she feels like there is more that they can do as she thinks this 20 per cent are really more of returning tourists.
This is something that is quite worrying for Malaysia. This is where we are coming from... if we want to improve the economic situation, have more tourists coming in because they are quick wins on improving things such as getting better current account balance and everything of that sort.
It is important that it’s not just airlines working together. It’s not just airlines bringing in the traffic or building the connectivity but it’s the whole ecosystem, which translates into a better cost of travel — not just the airfares, not just the connectivity but everything in it.
That also includes PSC. That also includes airports giving more efficient facilities and facilitating with the growth of the airlines because it all comes down to the cost of operations for the airlines.
If the cost of operations for the airlines in an airport is lower, then it benefits the passengers and we can pass that through and stimulate that demand better.
We can even introduce newer routes, which nobody dares to do. But with a lower cost, I mean this is a risk that we feel “okay and worth taking. Let’s introduce new destinations and connect them into Malaysia”.
Q: Is PSC part of an airline’s operating cost?
A: No, it’s not, actually. PSC is called passenger service charge. It’s the services that the airport provides which are charged to the passengers.
Q: Malaysia Airlines and, according to them, other 50 airlines as well as the International Air Transport Association are calling for the same rate at both KLIA and klia2 to create a level playing field. AirAsia is the only airline that is opposing the increase in PSC. Why is this so?
A: I think at the end of the day it affects the passengers because this is the amount being paid by the passengers. We don’t take anything from it. We are asked by the airport authorities to collect the PSC from the passengers. It will add to the overall cost of travel. I think people don’t realise that these days the price elasticity of air travel has become more and more sensitive.
Therefore, air travel is no longer just focused on people who can afford it. It’s not a luxury item anymore. It’s open for everybody. People see it as a mode of transportation. It’s like taking a bus to go somewhere. It is becoming more price-sensitive as people find the opportunity to fly to many places. So it will add up to the whole cost.
We have done some scenarios in terms
of how the quantum of the PSC increase will affect the number of passengers that will come in and eventually how it will affect in terms of the contribution to the economy.
There is that 12-times multiplier effect that the aviation industry has for Malaysia.
This is the reason why we actually feel strongly about it and to say that it is not a level playing field is incorrect because you are looking at two different business models here.
You are looking at a low-cost carrier and a full premium service. It’s two different products. It’s just like you are looking at Hilton hotel and their low-cost arm W hotel or Starbucks and a mamak stall.
So it’s two different markets, two different kinds of products. You’re not comparing apples to apples here. It’s like comparing apples to oranges.
The facilities provided in KLIA and klia2 are different too. KLIA has more facilities than what you see at klia2 in terms of user experience. It’s totally different between KLIA and klia2.