FRIDAY, March 29, 2024
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Aviation industry in Malaysia face five major impact

Aviation industry in Malaysia face five major impact

KUALA LUMPUR - Aviation industry in Malaysia face five major impact following the downgrade of air safety rating by the US Federal Aviation Agency. 

As Malaysia’s air safety rate has been downgraded to Category 2 by Federal Aviation Administration (FAA) of United States, Malaysian carriers are denied of US airspace and analysts are worried of chain reaction which see public perception of Malaysian carriers negative,  increase in both insurance premium and leasing rates.

Maybank Investment Bank Bhd is of the view that Malaysia may take up to two years to be back to Category 1 in its air safety rate. 

FAA released the unexpected result after assessing the Civil Aviation Authority of Malaysia (CAAM) in April. The immediate impact would be Malaysian carriers are unable to have new routes in US. Existing flight routes would be closely monitored. 

The downgrade will have long term and far-reaching impact including the negative public perception on flight safety of Malaysian carriers, difficult for Malaysian pilots and aviation engineers to secure jobs outside Malaysia, lose in maintenance, repair and operation business, sharp increase in insurance premiums and spike in aircraft leasing rates. 

“This is the first time Malaysia is denied of Category 1 in flight safety rating which will see series of chain-reaction taking place. Other Aviation authorities in the region may impose additional measures on Malaysian carriers following the downgrade by FAA,’’ said an analyst with Maybank investment Bank.

Asked whether there is any quick remedy, the answer is no, according to the analyst. 

The assessment by FAA has focused on the lack of manpower in CAAM. The government of Malaysia would need to allocate resources to resolve the shortcomings in CAAM as it does not have sufficient revenue to support its operation costs. 

Maybank Investment Bank Bhd is of the view that Malaysia would need a minimum of two years to return to Category 1. 

In its outlook report 2019 released in December last year, it had warned that Malaysia’s safety rating may be downgraded by international authorities. 

The investment bank said many experts and scholars had raised shortcomings of CAAM including lack of new blood, university graduates are not keen to take up review job on flight safety. Many staff are without professional background and staff are assigned by Public Services Department. Secondly, many left the jobs for higher pay. 

Thirdly, the salary increment is based on seniority instead of professional status. Fourthly busy airports may be equipped with state of art facilities but outdated infrastructures are still used at less busy airports.  Fifthly CAAM missed the review or slow in its follow up after review. This may be due to lack of manpower. 

Maybank maintained its negative rating on aviation industry and held the view that AAX may be facing greatest impact as it is flying from KL International Airport to Honolulu via Osaka. 

Airasia and Malaysia Airports have not been hit directly but some investors may review their stake based on the negative news. 

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