What was the challenge?
The Malaysian Aviation Commission is responsible for regulating aviation services charges levied on passengers and airlines at airports in Malaysia.
The Commission was looking to transition to a cost-based regulatory framework. One that would result in aviation service charges being set to allow operators, such as Malaysia Airports Holdings Berhad (MAHB), to recover their prudent and efficient costs, including a reasonable return on invested capital.
However, given the historically low levels of charges, and the growing need for large strategic investments at airports, this transition was likely to result in a substantial increase in the tariffs paid by airlines and passengers. Additionally, at the time the Commission was reviewing the regulatory framework, the aviation sector was still recovering from the unprecedented downturn in revenue and uncertainty caused by the COVID-19 pandemic.
As such, any change to the regulatory framework needed to balance the objectives of:
- promoting efficiency by moving to a cost-based approach to setting tariffs; and
- ensuring continuing growth in, and competitiveness of, the Malaysian aviation sector.
We were engaged by the Commission to develop a transitional regulatory framework and aviation services charges for the period 2024-27, which addressed the objectives and challenges above.
