Consultation Paper on Aeronautical Charges Framework
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Aeronautical Charges Framework – Consultation Paper 19 October 2018 1 TABLE OF CONTENTS EXECUTIVE SUMMARY ................................................................................. 5 BACKGROUND AND INTRODUCTION .......................................................... 6 Background .................................................................................................................6 Introduction .................................................................................................................6 Summary of consultation made to date .......................................................................7 Summary of feedback from stakeholders ....................................................................8 Timeline for future development of the framework .......................................................9 Context ...........................................................................................................10 Introduction ............................................................................................................... 10 Airport network structure in Malaysia......................................................................... 10 Airport operators and their responsibilities ................................................................ 10 Joint responsibilities for capital investment provide challenges ................................. 10 Senai market power assessment .............................................................................. 12 Overview of RAB framework ........................................................................14 Introduction ............................................................................................................... 14 Features of RAB ....................................................................................................... 14 Key building blocks ................................................................................................... 14 Calculation of RAB .................................................................................................... 15 Discussion on specific operating cost items .............................................................. 17 Calculation of regulated revenue: 2017 actual and illustration of 2020-2022 ............. 18 Historic analysis ........................................................................................................ 18 2018-2022 analysis ................................................................................................... 18 Tariff calculation ........................................................................................................ 21 Introducing tariff differentiation .................................................................................. 21 Introducing new types of tariffs .................................................................................. 21 Consultation and verification process ........................................................................ 22 Key issues for stakeholders’ consideration ...............................................23 Tariffs set at national, grouping or other level ............................................................ 23 Differentiating charges by geographic groupings ....................................................... 23 Weighted Average Cost of Capital (WACC) .............................................................. 24 Ability to outperform the WACC ................................................................................. 27 Capital expenditure and affordability ......................................................................... 28 Main capital enhancement projects being discussed by MAHB and GoM ................. 29 Form of charges control ............................................................................................ 31 Traffic forecasts ........................................................................................................ 32 Prefunding................................................................................................................. 32 CURRENT LEVEL AND STRUCTURE OF CHARGES .................................33 Structure of charges .................................................................................................. 33 Level of charges ........................................................................................................ 33 Benchmarking of current charges to comparators ..................................................... 34 2 Case studies of other airport networks with incentive-based price controls ....................................................................................................................36 Portugal (a network of 10 airports) ............................................................................ 36 Spain (a network of 46 airports) ................................................................................ 37 India (a network of 125 airports) ................................................................................ 38 Summary of key questions for consultation ...............................................40 Details of the consultation ......................................................................................... 42 TABLES Table 1 – Charges framework development timeline ..............................................................9 Table 2 – Terminal utilisation rate at Malaysian airports in 2017 ......................................... 11 Table 3 – Building blocks of the RAB ................................................................................... 15 Table 4 – MAHB asset data in 2017 (RM million) ................................................................. 16 Table 5 – Depreciation policies ............................................................................................ 17 Table 6 – Illustration of regulated revenue requirement (on a RM per departing passenger basis; in constant 2017 prices) ............................................................................................. 20 Table 7 – MAVCOM illustration of potential groupings of airports under consideration ......... 23 Table 8 – MAVCOM illustration ............................................................................................ 24 Table 9 – WACC assumptions ............................................................................................. 26 Table 10 – Historic levels of capital expenditure by MAHB ................................................... 29 Table 11 – Capital expenditure (in real 2017 price for period 2020-2024) affordability by average charge .................................................................................................................... 31 Table 12 - Charges levied at Malaysia’s airports from 1 January 2018 ................................. 34 Table 13 – Turnaround costs assumptions ........................................................................... 34 Table 14 – Turnaround costs for international airport service benchmarking ........................ 35 Table 15 – Turnaround costs for domestic airport service benchmarking ............................. 35 3 AIRPORT CODES Airport Airport No. Airport Name No. Airport Name Code Code Sultan Abdul Halim 1 AOR 17 MKZ Melaka Airport Airport (Alor Setar) Kota Kinabalu 2 BKI 18 MYY Miri Airport International Airport 3 BTU Bintulu Airport 19 MZV Mulu Airport Sultan Azlan Shah Airport 4 IPH 20 PEN Penang International Airport (Ipoh) Senai International 5 JHB 21 SBW Sibu Airport Airport Sultan Ismail Petra 6 KBR 22 SDK Sandakan Airport Airport (Kota Bharu) Kuching International Skypark Terminal Sultan Abdul 7 KCH 23 SZB Airport Aziz Shah Airport (Subang) Sultan Mahmud Airport (Kuala 8 KTE Kerteh Airport 24 TGG Terengganu) Sultan Ahmad Shah 9 KUA 25 TWU Tawau Airport Airport (Kuantan) Kuala Lumpur Manila Ninoy Aquino 10 KUL 26 MNL International Airport International Airport Kuala Lumpur Jakarta Soekarno-Hatta 11 KUL-T1 International Airport 27 CGK International Airport Terminal 1 Kuala Lumpur Don Mueang International 12 KUL-T2 International Airport 28 DMK Airport Terminal 2 13 LBU Labuan Airport 29 BKK Suvarnabhumi Airport Ho Chi Minh City Tan Son Nhat 14 LDU Lahad Datu Airport 30 SGN Internaitonal Airport Langkawi International 15 LGK 31 SIN Singapore Changi Airport Airport 16 LMN Limbang Airport 32 HKG Hong Kong International Airport 4 EXECUTIVE SUMMARY The Malaysian Aviation Commission is responsible for the economic regulation of the airports industry in Malaysia. The Malaysian Aviation Commission (hereafter “MAVCOM” or “Commission”), established in March 2016 as an independent economic regulator to the civil aviation industry in Malaysia, is responsible for the economic regulation of the airports industry in Malaysia, which includes the power to set aeronautical charges1 such as the Passenger Service Charges (“PSC”), aircraft landing and parking fees. Continuing the consultation process for an incentive-based, cost-related airport aeronautical charges setting framework. The Commission has been developing an aeronautical charges mechanism which shall serve as the long-term methodology for setting airport charges for all commercial airports in Malaysia. MAVCOM’s plan to develop this framework was announced to industry players in August 2017 and an information paper was provided in February 2018. This document represents the second consultation paper with a further MAVCOM