Air Asia Is Being Sued By Malaysia Airport Authority For Refusing To Pay Increased Passenger Fees, Countersues For Operational Deficiencies

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Air Asia is currently embroiled in a feud with Malaysia’s Airport Authorities and have now been sued for MYR 36 Mio. in outstanding Passenger Service Charges by Malaysia Airports Holdings Bhd (MAHB).

Air Asia’s CEO Tony Fernandes announced last December that the carrier would no longer collect the enhanced passenger service fees and henceforth not forward them to the airport authorities either.

The airline countered by suing the airport operator for MYR 400 Mio. for operational issues with the KLIA2 terminal, claiming it impacted the carriers operations.

The entire affair started when the new fees were announce in the Summer of 2017 (we wrote an article back then) and Air Asia immediately sensed that this would obviously push up their prices, making them less attractive to the low cost audience.

Now The Star reports that Air Asia is being sued for MYR 36 Mio. of uncollected passenger service charges – missing revenue for Malaysia Airports Holdings Bhd (MAHB).

The suit against AirAsia and its sister airline AirAsiaX Bhd over RM36mil in uncollected passenger service charges (PSC) is to establish clarity on the implementation of PSC as fixed by the government, says Malaysia Airports Holdings Bhd (MAHB).

MAHB said in a statement Tuesday (Feb 19) that the PSC rate was a legal matter and thus the issue must go through the legal processes.

“The PSC is a statutory rate fixed by the government and published via the gazette, and it affects the economics of the nation’s aviation industry,” it said.

MAHB added it was important to establish clarity on the implementation of the gazetted PSC, the roles and responsibilities of the airlines and airports, and the rights of the parties involved.

“These are matters of law that the court needs to decide to put the matters to rest, in order for the aviation industry to operate efficiently and competitively, and in compliance with all international aviation standards and regulations,” it said.

MAHB said it was their normal practice to inform shareholders through Bursa announcements of any material matters such as the PSC suit filed on AirAsia, as well as their counterclaims notice. …

The airport tax at KLIA2 was increased to RM73 from RM50 for non-Asean international passengers and to RM11 from RM6 for domestic passengers. However, AirAsia and AirAsiaX only collected RM50 instead of RM73, and that shortfall is what MAHB is claiming.

Being a low-cost airline, AirAsia wanted a no-frills airport with reasonable PSC charges to keep cost and airfares low, but the PSC charges have been revised upwards and AirAsia’s contention for not collecting the stipulated PSC amount is because it feels the services at KLIA2 do no match those of KLIA, which is a terminal for full-service carriers.

In response to MAHB’s suit, the airline is now counter-suing the airport operator for over RM400mil in a case involving operational disruptions at KLIA2.

Air Asia CEO Tony Fernandes and MAHB have been trading blows in the media for the last couple of months including a variety of tweets posted today:

Air Asia’s competition has also filed formal complaints against the carrier following the announcement that they would no longer levy the increased surcharges.

The position Fernandes takes here is rather unique. He doesn’t agree with the policy of the airport authority to increase the fees and unilaterally decides to no long charge and pay for it. That’s like saying I don’t agree with the amount of taxes and social security, so I will simply stop paying the government. How long would that work out before someone would come knocking on the door?

Tickets have certain costs associated with them and that’s simply a fact that customers have to live with and pay the facility charges according to the published fee schedule. And if one can’t afford it then Air Asia’s slogan should be changed to “Not everyone can fly!”.

Conclusion

Fernandes keeps referring to low cost airports but looking at KLIA2 I don’t see that much difference compared to the KLIA1 Main Terminal as far as operating expenditures are concerned. The terminal even has it’s own train connection with KLIA Ekspres.

Low cost carriers obviously want to keep the expenses and fees associated with tickets as low as possible to offer cheap flights but there are zero reasons why they should be given preferential, discounted rates at airports while the competition has to pay full rates.

Air Asia could always build or purchase their own airport if they don’t agree with the fee structure at KLIA but, other than that, they should pay the piper just as all other airlines and carriers have to do. If KLIA2 is really that terrible and there is a contract violation that warrants damages then the courts will handle that as a separate matter.

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