Airport tax hike likely

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Friday August 12, 2011

Analysts say it will affect the 'price-sensitive' domestic travellers

PETALING JAYA: The increase in airport tax for international travellers should not negatively impact tourism but if tax for low-cost carrier terminals (LCCTs) is raised, it will affect the "price-sensitive" domestic travellers, according to industry analysts.

Malaysia Airports Holdings Bhd (MAHB) would likely be increasing airport taxes soon following the approval from the Government to raise taxes from RM51 to RM65. It was reported that there was a high possibility the low cost carrier terminal (LCCT) tax would be raised by RM7.

OSK says the tax increase for international flights would not impede
passenger volume growth as it will not raise overall travel cost

OSK Research said the Government was withdrawing its subsidies for airline operations but the tax increase would be able to offset MAHB's operation costs.

"MAHB would probably reduce its profit-sharing with the Government to cushion the subsidies withdrawal," the research house said.

"The higher tax for international passengers may affect the Malaysia Airlines business but the impact will be minimal because an additional RM14 would not be much to international travellers," OSK said.

OSK added that the new tax was still low compared with Singapore or Indonesia.

Hwang DBS Vickers Research house said the increments would bring the new airport tax to the benchmark level of RM65 in line with the operating agreement signed between MAHB and the Government.

MAHB would probably reduces its
profit sharing...

The research house also said that higher tax for domestic flights would create a more significant impact on domestic tourism.

"However, the higher tax for LCCT is positive for MAHB," it added.

The research house also agreed with OSK in that the tax increase for international flights would not impede passenger volume growth as it "will not raise overall travel cost significantly".

However, another analyst believed that the rates should be maintained.

"The recent share swap between MAS and AirAsia is supposed to maintain the tax ar the LCCT. However, the increase could be reversed if the airline operators choose to do so," the analyst said.

This article is a verbatim copy of the original article from The Star.