The Dewan Rakyat (House of Representatives) and Dewan Negara (Senate) passed two Bills on 26 June 2024 and 30 July 2024 respectively which are of great significance to the nation’s aviation industry, namely the Civil Aviation Authority of Malaysia (Amendment) Bill 2024 and the Malaysian Aviation Commission (Dissolution) Bill 2024.
 
The Bills will now be presented for Royal Assent. Upon receipt thereof, the Bills will become law when they are gazetted and will come into operation on a date to be appointed by the Minister of Transport by notification in the Gazette.
 
Currently, civil aviation is jointly supervised by two regulatory bodies, the Malaysian Aviation Commission (“MAVCOM”) and the Civil Aviation Authority of Malaysia (“CAAM”), with each regulator having its own distinct objectives, functions and powers. Broadly, MAVCOM operates as the economic regulator to oversee commercial matters, while CAAM serves as the technical regulator to oversee safety, maintenance and security.
 
Both MAVCOM and CAAM are relatively new regulatory bodies. MAVCOM was established in March 2016 pursuant to the Malaysian Aviation Commission Act 2015 (“MAVCOM Act”) with the goal of promoting a commercially viable, consumer-orientated and resilient civil aviation industry which supports the nation’s growth. CAAM was established in February 2018 pursuant to the Civil Aviation Authority of Malaysia Act 2017 (“CAAM Act”), replacing the former Department of Civil Aviation, and its formation was in line with a requirement from the International Civil Aviation Organisation which had instructed member states to set up an autonomous civil aviation authority to ensure the efficient management of the safety and security of civil aviation.
 
The upcoming legislative overhaul will effectively transfer all of MAVCOM’s objectives, powers and functions to CAAM, thereby making CAAM the sole regulatory body for civil aviation in Malaysia.
 
One of the key reasons cited for the upcoming changes is to reduce bureaucracy and improve the efficiency of licensing services in civil aviation. Under the current system, any person seeking to use an aircraft to transport passengers, mail or cargo for hire or reward between two or more places, of which at least one place is in Malaysia, must first apply to CAAM for an air operator certificate and must thereafter separately apply to MAVCOM for an air service licence or permit. As such, a sole regulator may streamline the process of obtaining such licences.
 
In addition to granting air service licences and permits, MAVCOM’s principal powers currently include the regulation of competition matters within the aviation industry, the protection of consumers within the aviation industry, and the regulation of several key aviation service charges.
 
The upcoming legislative overhaul will not remove or amend any of MAVCOM’s existing powers, such as those set out above, but instead will directly transfer all of these powers to CAAM. Furthermore, all monies currently contained in or due to be paid to MAVCOM’s various funds will similarly be transferred to CAAM.
 
Nonetheless, it is noted that section 18 of the CAAM Act provides that CAAM shall be responsible to the Minister of Transport who may give certain directions to CAAM. A similar provision does not exist under MAVCOM Act, with MAVCOM being much more independent in nature. In this regard, the upcoming legislative changes may allow for the Ministry of Transport to take a more direct approach in economic issues within the aviation industry, which may include (but is not limited to) giving CAAM directions regarding licensing issues and the fixing of rates for key aviation service charges. The Ministry of Transport’s potential intervention in the regulation of such issues was heavily debated in Parliament before the Bills were passed and the extent of such intervention will only be known once the legislative changes have taken effect.
 
This Alert prepared by Shannon Rajan (Partner) and Eric Gabriel Gomez (Senior Associate) of the Aviation Practice of Skrine.