MAVCOM Refutes Allegations by Heads of Defunct Airlines
Commission stands firm in its decision to protect consumers
With reference to recent allegations made by Eaglexpress Air Charter Sdn. Bhd. ("Eaglexpress") president Captain Azlan Zainal Abidin and Suasa Airlines Sdn. Bhd. ("Suasa Airlines") CEO Captain Sheikh Salleh Abod, the Malaysian Aviation Commission ("MAVCOM"), would like to address the allegations as follows:
On 9 January 2017, Suasa Airlines pleaded guilty at Sepang Sessions Court for operating without a valid Air Service Permit ("ASP") and was fined RM380,000.
Suasa Airlines pleaded guilty to carrying passengers for hire or reward on a non-scheduled journey between Kuala Lumpur and Langkawi without a valid ASP in contravention of section 36 of the Malaysian Aviation Commission Act 2015 [Act 771].
Matters relating to the issuance, suspension and revocation of an Air Service Licence ("ASL") and ASP come within the scope of responsibility of MAVCOM since its establishment on 1 March 2016. Airlines that do not possess a valid ASL or ASP are not permitted to perform a commercial air service operation in Malaysia. For an entity to operate a commercial airline business, it is required to hold either an ASL or ASP issued by MAVCOM and an Air Operator Certificate ("AOC") issued by the Department of Civil Aviation which is now known as the Civil Aviation Authority of Malaysia ("CAAM").
On 22 July 2016, MAVCOM rejected Suasa Airlines' application to operate a non-scheduled commercial flight from Kuala Lumpur to Langkawi as it did not possess an ASP. However, on the same day, Suasa Airlines continued to operate this flight on the pretext of a "demonstration flight". The return "demonstration flight" on 22 July 2016 from Kuala Lumpur to Langkawi carried a total of 140 passengers each way and is not considered as a "demonstration flight" as per International Civil Aviation Organisation's (ICAO) classification.
The Commission then proceeded to conduct a thorough investigation on the matter which was then brought up to the Attorney General's Chambers ("AGC") for consent to prosecute to be obtained.
MAVCOM would like to stress the importance of complying with the laws and regulations, which is a fundamental requirement for participation in the industry. It is necessary for airlines to have all regulatory approvals in place before operating, as required not only by Malaysian laws but also in compliance with international legal requirements and practices.
Stringent steps taken by the Commission is ultimately to ensure a resilient aviation industry as well as to safeguard consumers, and therefore the Commission is firm in its standing and will take actions on offenders that do not comply with the industry laws and regulations.
On 30 August 2016, MAVCOM granted Eaglexpress an ASP effective for a period of 12 months (from 1 September 2016 up to 31 August 2017) with specific conditions imposed by the Commission to be complied with by the airline within stipulated timeframes. Eaglexpress failed to comply with the said conditions within the stipulated deadlines.
On 1 December 2016, MAVCOM issued a show cause letter to Eaglexpress giving it an opportunity to provide justifications as to why its ASP should not be revoked.
Eaglexpress submitted its representation in writing to MAVCOM on 14 December 2016. However, upon reviewing the said written representation, on 20 December 2016, MAVCOM revoked Eaglexpress' ASP as the reasons provided were not satisfactory. The airline has failed to provide sufficient evidence to convince the Commission that it will be able to resolve all concerns raised and comply with the conditions imposed.
MAVCOM revoked the ASP as Eaglexpress was unable to meet the below requirements:
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convert its current negative shareholders' equity to a positive position by 30 November 2016;
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to increase its cash level to RM30.0 million being equivalent to approximately two months of projected operating cost for 2016, as provided by the airline itself, by 30 November 2016; and
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to resolve all long-standing pending salary and relevant employee benefits payment by 30 October 2016 and to normalise the salary and benefits payment from November 2016 onwards.
Eaglexpress had also applied for a judicial review of MAVCOM's decision to revoke its ASP at the Kuala Lumpur High Court. On 14 August 2017, Eaglexpress' application was dismissed by the High Court with costs of RM10,000 to be paid by Eaglexpress to MAVCOM.
This case of Eaglexpress, as well as the earlier case with Suasa Airlines are clear indications to potential and current industry players that operating an airline (chartered or scheduled) is extremely challenging and requires a high degree of planning, financial depth, operational know-how and execution competency. A robust commercial foundation and depth are therefore necessary prerequisites to be a player in this industry - regardless of whether it is an ASP or ASL holder.
The Commission's responsibility is to ensure enterprises participating in the industry are properly equipped and ready, in order to safeguard consumers' safety and interest. As an independent economic regulatory body established pursuant to Act 771, MAVCOM's mission is to promote and ensure a commercially viable, consumer-oriented and resilient civil aviation industry that supports Malaysia's growth.