MALAYSIA’S aviation players could potentially lose up to RM4 billion due to the indirect impact of a downgrade by United States regulator on the country’s air safety rating.

The Malaysian Aviation Commission (Mavcom) said this will occur if regulators in China, Japan and South Korea follow US Federal Aviation Administration’s (FAA) decision.

Last November, the FAA downgraded the safety rating of Malaysian carriers and airports from category one to two. 

FAA’s decision meant that Malaysian airlines are banned from creating new routes or expanding existing ones in the US, Mavcom said in a press conference in Kuala Lumpur today.

Several years ago, Thailand’s aviation sector was also downgraded by the FAA and when that occurred, China, Japan and South Korea did the same to Thai carriers, said Mavcom chief operating officer Azmir Zain.

“If the three regulators take a similar position as the US body, the loss of revenue for 2020 will be about RM4 billion for Malaysian carriers.”

This is because passengers from China, South Korea and Japan make up 8.6% of seat capacity for all Malaysian carriers, he said.

The FAA’S category two rating was given to the Malaysian Civil Aviation Authority (CAAM) after finding that the latter was unable to meet the safety standards of the International Civil Aviation Organisation (Icao).

Malaysia joins Bangladesh, Ghana, Costa Rica, Thailand and Curacao in the category two list.

For now, the FAA downgrade will directly cost Malaysian carriers RM360.8 million and RM10.8 million for airport operators due to revenue loss from the US market.

“Given Malaysia’s recent re-election as an Icao council member from 2019 to 2022, the downgrade is particularly embarrassing and tarnishes the country’s image,” Mavcom said in a statement today.

“Even if there are no official announcements of restrictions, other civil aviation authorities may discriminate against Malaysian carriers in their internal decision-making – fewer air traffic rights and unattractive airport slots may be offered.”

The Transport Ministry had announced that it would be reforming and restructuring CAAM, merging it with Mavcom as a way to deal with the rating downgrade. – February 11, 2020.