An increase in airport charges has set AirAsia on the warpath with Malaysia Airports Holdings Berhad (MAHB).
The low-cost carrier has refused to collect the extra RM23 Passenger Service Charge (PSC) that MAHB has imposed on each passenger travelling through klia2 starting July 2018. This is on top of RM50 PSC it already imposes.
In mid-October, MAHB sued AirAsia for unpaid dues of RM36.1 million.
For a long time, AirAsia had argued that the inferior services and facilities at klia2 do not justify the additional charges.
In December, the long-running dispute went up a notch when AirAsia publicly chided MAHB following announcement of the latter's record profits for 2017, which it attributed to an increase in PSC and growth in passenger numbers.
Any company will want to make sure that it pushes the highest bottom line. But at the end of the day, is it justifiable to charge higher rates
MAHB, according to AirAsia, owed improved performance to its structural dominance as a ‘monopoly’, and that the profits came at cost to the Malaysian economy and tourism industry.
AirAsia has also threatened to file cross claims against MAHB, claiming financial impact due to major apron defects, random closure of runways, damage to aircraft and rupture of fuel pipelines.
Today, AirAsia announced it will cease charging the RM3 klia2 fee for all flights departing from the airport to keep fares low.
We speak to Benyamin Ismail, CEO of AirAsia X on the group’s battle with MAHB.
“Any company will want to make sure that it pushes the highest bottom line. But at the end of the day, is it justifiable to charge higher rates? This is, especially, when you are a monopoly. We feel that MAHB is a monopoly in all airports. They can do whatever they want,” says Benyamin on Let’s Talk With Shaarad Kuttan.
“I think the most important message that we want to tell people is, airlines like us, or any other airlines, do not have a service level agreement with MAHB. So, they can pretty much do anything they want in terms of providing substandard facilities, where we can’t do anything about it,” he adds.
Will the Ministry of Transport step in to resolve this dispute?
The Ministry of Transport called on the management of AirAsia and MAHB to resolve the PSC dispute, which has turned into an ugly corporate feud.
In mid-December, its Minister Anthony Loke said MoT will initiate the mediation process to de-escalate the situation.
"For us, we just want to come to a common ground together. Unfortunately, the way we see it, it been one way traffic for us – which is just us, knocking on the door and no one is opening it, and that’s the tough part for us,” says Benyamin.
“MOT has to step in, they have to do something. MAVCOM, which is supposedly to be independent party, has to step in as well. So, until a study (on the situation) is done, there should not be any push for us to pay that difference (in PSC charges).”
Malaysia Must Step Up Its Travel and Tourism Competitiveness
We also ask Benyamin on what are the headwinds in the aviation sector. Apart from oil price volatility, Benyamin views that the government could expand the visa waiver program to additional countries as a way to stimulate tourism.
Malaysia's tourism arrivals dropped by 3% with 25.95 million tourists in 2017, compared to 26.76 million in 2016.
In comparison, Thailand recorded a 7.8% increase in tourist arrivals, Singapore, 6.2% and the Philippines, 11%.
“What we want to do is to ensure fares are affordable for everybody. That is within our control. Something like airport tax is beyond our control. For us, the country has to make an effort to make sure that (we stay competitive).”
“Take Bangkok as an example. They (Thailand) know the biggest tourism (market) for them is China. They have recently taken away visa charges for Chinese tourists to encourage people to visit. Things like that has to happen in Malaysia as well. We are still charging people from China to come in.”
“We see the data coming out from Tourism Malaysia - the numbers are declining year on year. People are choosing to go to Thailand, people are choosing to go to Indonesia or wherever – but not Malaysia. So, that’s why we want to be voice to make sure that the airports and us work together to not be far behind from everybody else. Because everybody else is becoming more efficient in what they do.”
Competition heating up for price-sensitive passengers. What are the value propositions for tourists to come to Malaysia?
“For RM1000 potentially you can go to Tokyo from somewhere else. Why not? Because that gives you a better proposition. That RM1000 in Malaysia? You have the PSC, you have hotel tax that’s being charged to tourists that comes into Malaysia. Soon, passengers will have an exit tax to pay as well,” says Benyamin.
In Budget 2019, Putrajaya proposed a departure levy on all passengers using Malaysian airports from June onwards, in a bid to encourage the development of domestic tourism.
“When everything (charges) adds up, it becomes less of a proposition for us. You can see the hotels in Thailand are much cheaper than Malaysia and they have more propositions. So, we have to find ways to reduce costs somewhere and I think the first thing to do is to reduce costs in visa and airport fees."
Has Malaysia dissapeared of the global tourist radar? What more can be done to make Malaysia an attractive tourist destination?
We must also become more proactive in trying to promote more areas, not just certain places like KLCC. Look at Thailand, within the country, there’s about 8 to 15 other key destinations that you can go
“I meet a lot of Tourism Malaysia people from all across stations that I fly to, like Australia and Japan. What we are hearing is the same thing - that funds are being cut and not enough money is being put into promoting Malaysia. I understand that Malaysia is going through a rough time, but I think they need to see where the real income is coming from. If you can stimulate tourism, you can spend a bit more. Just like what we say about the airports - you reduce the costs, more people will come. It’s a volume driven (business),” Benyamin explains.
“I think we must also become more proactive in trying to promote more areas, not just certain places like KLCC. Look at Thailand, within the country, there’s about 8 to 15 other key destinations that you can go.”
“In Malaysia, if you ask anyone on the street, they only know Penang, they only know KLCC and they only know the Orangutan in Kota Kinabalu. You don’t promote Pangkor, you don’t promote all the other islands, and we have very beautiful parks. They (Tourism Ministry) really have to push that. The Koreans and Japanese, they love oceans! And we have among the the best, pristine oceans in Asia. That’s about education, and if you spend a little bit more, people will see it and people will come. Malaysia will benefit from that.”
What is the growth potential for AirAsia X?
“I think the biggest market for us to grow is potentially North Asia. We’ve started to be very aggressive in China, Japan, Taiwan and India. A the moment, I think we’ve built (those routes) quite efficiently. For example, we fly three times a day to Incheon (South Korea) on a wide-body – which is a very big fleet for us. We do Taipei three times a day. We are going to launch Japan’s fourth destination Fukuoka in January.”
“In China, we are growing into that market very aggressively as well. We’ve covered the first-tier cities which is about 100 million people; we’re going into the second-tier cities which is about 50 million. Now, we are going into the third-tier cities which is about 20 million people. The other country we are going into now is India. There’s a lot of potential there, even as a connection route to Australia via Malaysia. The only issue with India is the bilateral (flying rights) are constrained, but cities like Jaipur and Amritsar are doing very well for us.”
“The biggest feat for us was our first foray to the United States, which is Hawaii. That’s done very well for us. We’ve started with four (flights) a week, and we’ve up to seven now. We won’t stop because at the end of the day, we want to bring as many ASEAN people into Hawaii or into the U.S. It’s still a small portion but the number of Japanese travelers is quite big. About 80 percent travellers on our Kuala Lumpur-Osaka-Honolulu flights are Japanese.”
Becoming CEO: What Does Corporate Leadership Mean in the Age of Twitter?
We ask Benyamin how he navigates through the social media. How does one reduce the risk presented by social media and still tap into its promises? In AirAsia’s case, engaging with millions of its passengers from all over the world.
I don’t mind raising anything that we feel may be controversial as long as it is factual. When I see issues at Malaysia Airports or anywhere else, I am just a voice
“Working with Tony (Fernandes) and Kamaruddin (Meranun), you learn from them - you see how they work through social media, I think I got a bit of that from them,” says Benyamin.
“Social media is something I am getting better at. I’d rather keep everything to myself but I am getting more active on Instagram and Twitter. What I’ve been pushing hard about are destinations - where and what we fly, but less propaganda stuff. I want to sell a dream, that’s what I want to do and that’s very important to me.”
“But I don’t mind raising anything that we feel may be controversial as long as it is factual. When I see issues at Malaysia Airports or anywhere else, I am just a voice. Tony does the same as well because he has millions of followers - people would listen to him. Basically, what he’s doing is just passing on the message from a passenger. This is because (a post from a) passenger with only five followers have little impact. So, Tony takes that, adds a bit of spice and that’s really it. I’ll do the same as well, I’m willing to do that,” says Benyamin.