U.S. downgrade could stoke bias against Malaysian airlines: regulator

[February 11, 2020] KUALA LUMPUR (Reuters) - Malaysia's aviation regulator said on Tuesday its airlines could be discriminated against by foreign authorities after the country's air safety rating was downgraded by the U.S. Federal Aviation Administration (FAA) late last year.

A Malaysian Airlines flag flies in front of the traffic control tower at Kuala Lumpur International Airport in Sepang July 18, 2014. REUTERS/Olivia Harris/File Photo

The Malaysian Aviation Commission (MAVCOM) said the immediate impact of the FAA downgrade was expected to be minimal, but things could change if the U.S. move triggered similar audits by other civil aviation authorities.

China, South Korea and Japan all stopped Thai-based airlines from flying charters and new routes because of safety concerns raised by the International Civil Aviation Organization in 2015, which was followed by an FAA downgrade.

"Should they similarly prohibit Malaysian carriers from undertaking new operations to their respective countries, the impact will be greater than the downgrade by the U.S. FAA," MAVCOM said in a statement, referring to China, South Korea and Japan.

"It should be noted that even if there are no official announcements of such restrictions, other civil aviation authorities may implicitly discriminate against Malaysian carriers in their internal decision making."

It said other countries could offer "fewer air traffic rights and unattractive airport slots" to Malaysian airlines.

Malaysia's airline industry is dominated by state-owned Malaysia Airlines, AirAsia Group Bhd <AIRA.KL> and its long-haul arm AirAsia X Bhd <AIRX.KL>.

MAVCOM said it had yet to hear from the three countries about any action they might take.

"If the civil aviation authorities of these countries follow the U.S. FAA's actions, the estimated revenue-at-risk for the Malaysian carriers" is 4 billion ringgit ($966 million), or 24% of their revenue a year, MAVCOM said.

MAVCOM also cast doubt over the Malaysian government's view that it would be able to regain the top FAA category in 12 months, noting that Thailand had yet to restore its rating and the Philippines took six years to return to Category 1 following its own downgrade.

The FAA's safety ratings do not affect existing flights.

(Reporting by Liz Lee; editing by Jane Wardell and David Evans)

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