Regulatory framework

Regulators and primary legislation

Which bodies regulate aviation in your country? Under what basic laws?

Presently in Malaysia, there are two regulatory bodies that regulate the aviation industry. 

The first and primary regulatory body is the Civil Aviation Authority of Malaysia (CAAM) under the Civil Aviation Authority of Malaysia Act 2017 (the CAAM Act 2017). There are two pieces of primary legislation that regulate the functions of the CAAM, namely the CAAM Act 2017 and the Civil Aviation Act 1969 (the CA Act 1969). The CA Act 1969 incorporates and gives effect to the Convention on International Civil Aviation 1944 (the Chicago Convention). Generally, the CAAM is empowered to regulate the safety and security of civil aviation, including the establishment of standards and their enforcement, the provision and operation of aviation services and the discharge of Malaysia’s international obligations in respect of civil aviation. 

The second regulatory body is the Malaysian Aviation Commission (MAVCOM) established under the Malaysian Aviation Commission Act 2015. The MAVCOM regulates economic matters relating to civil aviation, such as improvement of connectivity for promotion of trade and investment, competition in the civil aviation industry and consumer protection matters. 

This may change in light of an announcement by the Malaysian government in December 2019 that the MAVCOM may be dissolved to enable its functions to be absorbed by the CAAM. At the time of writing, the Bill to effect dissolution of the MAVCOM and to streamline the regulatory framework has yet to be tabled in the Malaysian Parliament.

Aviation operations

Safety regulations

How is air transport regulated in terms of safety?

Generally, air transport safety is regulated by the Civil Aviation Authority of Malaysia (CAAM) under the Civil Aviation Act 1969 (the CA Act 1969) and other secondary legislation, such as the Civil Aviation Regulations 2016 (the Regulations). 

In respect of the operators and aircraft generally, the Regulations are primarily aimed at ensuring airworthiness of aircraft, safe navigation of aircraft in the Malaysian airspace and safety of persons carried on aircraft. The airworthiness of aircraft is regulated through certification requirements that allow the CAAM to oversee matters such as the design and manufacture of aircraft and aeronautical products and maintenance of aircraft. This is complemented by the requirements for operators to ensure provision or installation of equipment necessary for the safe navigation of aircraft and maintenance of this equipment in serviceable condition. 

In respect of operators of commercial air transport operations, the Regulations impose overriding responsibilities on the operators to ensure safety. For example, the operators have overall responsibility for ensuring that crew members are competent to fly and that the aircraft are safe to fly, notwithstanding specific requirements on flight crew in that regard.

In respect of crew, the Regulations prescribe the number of pilots and cabin crew members on an aircraft depending on the type of air transport. The CAAM may order that there be additional provisions based on safety requirements of the aircraft and passengers. In addition, flight crews are subjected to stringent training, test and licensing requirements to ensure they are fit to fly. 

In respect of the operations of aircraft, the responsibility is primarily placed on the pilot-in-command, who is expected to be in control of the aircraft at all times while in flight, to ensure the safety of the aircraft and passengers. The responsibilities cover a range of safety matters, such as pre-flight actions to ensure the flight is safe and the passengers are briefed. The Regulations expressly prohibit certain conduct on aircraft, such as drunkenness and smoking, which are likely to endanger the safety of the aircraft. 

The air traffic control of the Malaysian airspace is managed by the Air Traffic Management Division of the CAAM. The Division is primarily responsible for the safe, orderly and expeditious flow of air traffic. This covers a range of matters such as prevention of collision between aircrafts, obstructions and the ground, assisting aircraft in avoiding hazardous weather and prohibited airspace, and assisting aircraft in distress.  Air traffic controllers are subjected to stringent licensing requirements to ensure they are fit to act as air traffic controllers. 

As a general position on safety regulations, the CAAM is empowered to issue safety directives on various aspects, including the safety of any aircraft operation in Malaysia and the operation of Malaysian aircraft outside Malaysia; the inspection, overhaul or maintenance of aircraft or aircraft components; licensing and certification requirements; and the operation or management of an aerodrome. Compliance with safety regulations is monitored by the CAAM. There are certain aspects of safety regulations, such as control of obstructions in the vicinity of aerodromes, that come specifically under the purview of the Minister of Transport.

What safety regulation is provided for air operations that do not constitute public or commercial transport, and how is the distinction made?

There is very little distinction between public or commercial transport on the one hand and private operations and aerial work on the other insofar as general safety regulation is concerned. 

Market access

How is access to the market for the provision of air transport services regulated?

Historically, access to the market was primarily motivated by public policy and public service obligations to ensure accessibility.  

The enactment of the CA Act 1969 was key to regulating access to the market, primarily from a safety point of view. The subsequent enactment of the Malaysian Aviation Commission Act 2015 marked a departure from this approach as it introduced competition as another key aspect in which access to the market is regulated.  

Ownership and control

What requirements apply in the areas of financial fitness and nationality of ownership regarding control of air carriers?

Control of air carriers is primarily effected through licensing and certification requirements. An operator must have an air service licence (ASL) issued by the Malaysian Aviation Commission (MAVCOM) and an air operator’s certificate (AOC) issued by the CAAM to undertake carriage by air or use of any aircraft for the carriage of passengers, mail or cargo for hire or reward, and must abide by the conditions attached, if any, to the ASL or AOC, as the case may be.

The regulations do not expressly prescribe financial fitness or nationality of ownership as requirements for licensing and certification purposes. 

Based on publicly available sources regarding the criteria considered by the regulatory bodies in assessing an application for a licence or certificate, it appears that substantial national ownership, which encompasses both financial fitness and nationality of ownership, is a requirement for control of air carriers. In relation to financial fitness, it appears that factors such as the feasibility and financial viability of the proposed operations are relevant. In relation to nationality of ownership, it appears that factors such as Malaysian ownership or Malaysian control of the air carrier are relevant. In respect of the latter, the regulatory body must be satisfied that the air carrier is under the control of a Malaysian person at all times. A person is deemed to have control if: (1) he or she has an equity interest of more than 50 per cent in the air carrier; and (2) he or she has the power to influence the election or appointment of a majority of the directors of the air carrier or has the power to influence the business and administration decisions of the air carrier.

Licensing

What procedures are there to obtain licences or other rights to operate particular routes?

Licensing and other operational rights are regulated by the CAAM and the MAVCOM. 

An operator must have an ASL issued by the MAVCOM and an AOC issued by the CAAM to commence operations for scheduled journeys. The ASL is different from an air service permit (ASP) issued by the MAVCOM for operations of unscheduled journeys.

An applicant is required to have a valid AOC issued by the CAAM before an ASL can be issued. To obtain both the AOC and ASL, the procedure requires an applicant to first make an application to the MAVCOM for an ASL by submitting the prescribed form (available at the MAVCOM), paying the prescribed fees and providing the requisite supporting documents and information, such as the following:

  • documentation in relation to the applicant company;
  • details of the applicant’s organisational structure;
  • details regarding the applicant’s financial status and projections;
  • details of the applicant’s proposed business plan for the next five years;
  • timetables and tariffs;
  • details of the applicant’s aircrafts;
  • aircraft maintenance programme;
  • AOC; and
  • fit and proper declaration in the prescribed form (available at the MAVCOM).

 

If the documents and information are satisfactory to the MAVCOM, the applicant will be issued with a conditional approval (CA). 

The CA will enable the applicant to apply for an AOC from the CAAM. To do so, the applicant must submit the prescribed form (available at the CAAM), pay the prescribed fees and provide the requisite supporting documents and information. In the event the documents and information are satisfactory to the CAAM, the CAAM will issue an AOC to the applicant. 

The MAVCOM will issue the ASL after a valid AOC is issued. 

To complement the operations, there are other licensing requirements to be satisfied, such as the Air Traffic Right Certificate on allocations of air traffic rights (ATRs) and the Certificate of Airworthiness for aircrafts to be flown. 

As both regulatory bodies are empowered to prescribe new guidelines or requirements deemed necessary for such applications from time to time, an applicant must verify the latest guidelines or requirements prescribed before an application is made.

What procedures are there for hearing or deciding contested applications for licences or other rights to operate particular routes?

The regulations prescribe dispute resolution procedures in respect of any dispute between two or more providers of aviation services. The providers are required to first attempt an amicable resolution through mediation within the stipulated time frame. If the providers fail to resolve the dispute amicably, the MAVCOM shall hear and determine the dispute. The MAVCOM is required to maintain a register of its decisions. 

The only other procedure prescribed by the regulations relates to the judicial review process that may be commenced by an aggrieved party in relation to decisions by the MAVCOM on competition matters only. 

There is no specific dispute resolution procedure prescribed for contested applications if such matters do not concern a competing service provider. Based on publicly available sources, it appears that an applicant who is dissatisfied with a policy decision of the MAVCOM may make a submission in writing to the MAVCOM. There is no publicly known format or timeline for the submission. As the MAVCOM is empowered to prescribe guidelines deemed necessary from time to time, an applicant should verify the latest applicable procedures, if any, before a submission is made.

Competition policy

Is there a declared policy on airline access or competition? What is it?

One of the declared functions of the MAVCOM is to encourage effective competition within the industry.

Generally, the Malaysian Aviation Commission Act 2015 prohibits certain conduct that is not conducive to a competitive environment. The Act prohibits an agreement between enterprises that has the object or effect of significantly preventing, restricting or distorting competition in the market or conduct that amounts to abuse of dominant position or mergers that have resulted, or may be expected to result, in a substantial lessening of competition in the market.

The MAVCOM is empowered to issue and publish such guidelines as may be expedient or necessary from time to time to regulate such matters. It has accordingly issued and published the following guidelines (collectively referred to as the Competition Guidelines) relevant to airline access and competition:

  • Guidelines on Aviation Service Market Definition;
  • Guidelines on Anti-Competitive Agreements;
  • Guidelines on Abuse of Dominant Position;
  • Guidelines on Substantive Assessment of Mergers;
  • Guidelines on Notification and Application Procedure for an Anticipated Merger or a Merger;
  • Guidelines on the Determination of Financial Penalties; and
  • Guidelines on Leniency Regime.

 

The Competition Guidelines essentially seek to incorporate competition concepts and principles based on domestic and international practices on competition.

Requirements for foreign carriers

What requirements must a foreign air carrier satisfy to operate in your country?

The MAVCOM maintains a list of the bilateral and multilateral air service agreements to which Malaysia is a party. 

On the assumption that a foreign air carrier has the necessary ATRs, a foreign air carrier intending to exercise the ATRs must apply to the MAVCOM, through the CAAM, by submitting the prescribed form (available at the CAAM), paying the prescribed fees and providing the relevant documents and information for the issuance for the Foreign Air Operator Certificate (FAOC) to operate. The CAAM has published a Foreign Air Operator Certificate Compliance Matrix, which contains a guide on the documents and information required for the application. If the MAVCOM finds the documents and information satisfactory, it will issue a FAOC to the foreign air carrier to operate. 

At the same time, the foreign air carrier must also apply to the National Slot Coordination Malaysia for slot allocation. The MAVCOM exercises a supervisory and monitoring role in relation to slot allocation. 

The foreign air carrier may operate upon issuance of the FAOC and slot allocation confirmation.  

Public service obligations

Are there specific rules in place to ensure aviation services are offered to remote destinations when vital for the local economy?

Public service obligations were particularly relevant for East Malaysia, in the states of Sabah and Sarawak, as the geographical terrain and landscape are such that certain remote areas are inaccessible except by air transport. 

Public service obligations are managed, monitored and supervised by the MAVCOM. Among others, the MAVCOM identifies the criteria for designation of public service obligation routes and evaluates the government funds needed in the Public Service Funds to aid airline operators servicing these routes. 

Charter services

How are charter services specifically regulated?

Charter services are regulated by specific regulations applicable to carriage by air or use of any aircraft for unscheduled journeys and by general regulations applicable to carriage by air or use of aircraft. 

Regulation of airfares

How are airfares regulated?

The MAVCOM is empowered to regulate charges for aviation services, including setting maximum charges for aviation services, and the method for determination of these charges. To complement this, the MAVCOM is empowered to prescribe a consumer code on the minimum policies and practices. 

The Malaysian Aviation Consumer Protection Code 2016 (the 2016 Code) regulates certain aspects relating to airfares. An airline is obliged to make full disclosure of airfares by clearly itemising the charges imposed by the airline. The 2016 Code prohibits post-purchase price increases and automatically adding on services. 

Complaints by consumers on non-compliance of the 2016 Code are heard and determined by the MAVCOM.

Drones

How is the operation of unmanned aircraft systems (drones) regulated?

Generally, the flying of unmanned aircraft systems (drones) requires advance authorisation from the MAVCOM if the aircraft system is to be flown over certain restricted airspace or for certain purposes. In the event advance authorisation is required, an application may be made to the CAAM by submitting the prescribed form (available at the CAAM) and paying the prescribed fees.

For operation of a small unmanned aircraft, although advance authorisation from the CAAM is not required, the regulations require the person in charge of the aircraft to be satisfied that the flight can be safely made before flying, and for direct and unaided visual contact to be maintained with the aircraft to maintain its flight path and avoid collision. 

Aircraft

Aircraft register

Who is entitled to be mentioned in the aircraft register? What requirements or limitations apply to the ownership of an aircraft listed on your country’s register?

The Civil Aviation Authority of Malaysia (CAAM) keeps and maintains an Aircraft Register for all aircraft registered in Malaysia. The Register should contain information, details and particulars as may be determined by the CAAM from time to time. 

The Aircraft Register should contain the following information:

  • nationality and registration mark;
  • manufacturer of the aircraft and its designation;
  • serial number of the aircraft;
  • name and address of the person who is entitled as the owner of the aircraft;
  • name of the charterer or hirer in the case of an aircraft chartered by demise or hired by a ‘qualified person’;
  • date of registration;
  • date of expiry of the Certificate of Registration; and
  • any other particulars deemed necessary by the CAAM.

 

The Civil Aviation Regulations 2016 provide that an aircraft may be registered in Malaysia in the name of a qualified person, which essentially means (1) the Malaysian government, (2) a Malaysian citizen or (3) a body incorporated, with a registered office in Malaysia. 

For non-Malaysian citizens who reside in Malaysia or companies incorporated outside Malaysia with their place of business in Malaysia that hold legal or beneficial interests by way of ownership or shares in aircraft, the CAAM may register the aircraft in Malaysia in that person’s name but the aircraft must not be used for commercial air transport or aerial work.  

Mortgage register

Is there a register of aircraft mortgages or charges? How does it function?

The particulars of aircraft mortgages are included in the Aircraft Register of the CAAM.

A person may apply to enter a mortgage of an aircraft in the Aircraft Register by submitting the prescribed form to the CAAM (available at the CAAM) and paying the prescribed fee. If the application is allowed, the CAAM will notify the applicant of the date, time and register number of the entry of the mortgage in the Register. Any person may apply to amend or remove the entry of a mortgage in the Register by submitting the prescribed form to the CAAM (available at the CAAM) and paying the prescribed fee.

Detention

What rights are there to detain aircraft, in respect of unpaid airport or air navigation charges, or other unpaid debts?

In the event of non-payment of charges due to the CAAM, the CAAM has the right to detain the aircraft concerned, regardless of whether it was due or incurred by the owner or operator of the aircrafts at the time the detention begins, or any other aircraft owned or operated by the person in default. The CAAM cannot exercise these rights if the owner or operator or other interested person disputes the charges or provides sufficient security for the payment of the charges pending determination of the dispute. 

The particulars relating to the detention shall be entered into the Aircraft Register. In the event of the exercise of these rights by the CAAM, the regulations require the CAAM to notify the owner, operator, lessee, hirer, charterer or pilot-in-command of the aircraft or any secured parties of the detention.

Maintenance

Do specific rules regulate the maintenance of aircraft? What are they?

The maintenance of aircraft is primarily regulated through the certification of airworthiness mechanism.  A person is prohibited from flying an aircraft unless there is a valid certificate of airworthiness for the aircraft and all conditions attached to the certificate or prerequisites to the validity of the certificate, if any, are complied with. The validity of the certificate hinges upon satisfactory completion of the overhaul or maintenance of the aircraft and such equipment as may be necessary. 

Airports

Ownership

Who owns the airports?

Most of the airports providing civil aviation services are owned by the Malaysian government. The majority of these airports are operated by an entity known as Malaysia Airports Holdings Berhad (Malaysia Airports) and the remaining three airports are operated by three unrelated corporate entities. The government has a majority stake in Malaysia Airports through various government-related agencies. 

Licensing

What system is there for the licensing of airports?

An airport operator must have an Aerodrome Operator Licence (AOL) issued by the Malaysian Aviation Commission (MAVCOM) to operate an aerodrome, which includes airport and airstrip for the movement of aircraft.  

An applicant is required to have a valid Aerodrome Certificate (AC) issued by the Civil Aviation Authority of Malaysia (CAAM) before an AOL can be issued. To obtain both the AC and AOL, the present procedure requires an applicant to first submit an application to the MAVCOM for an AOL by submitting the prescribed form (available at the MAVCOM), paying the prescribed fees and providing the requisite supporting documents and information such as the following: 

  • documentation in relation to the applicant company;
  • details of the applicant’s organisational structure;
  • details regarding the applicant’s financial status and projections;
  • details of the applicant’s proposed business plan;
  • AC; and
  • fit and proper declaration in the prescribed form (available at the MAVCOM).

 

If the documents and information are satisfactory to the MAVCOM, the applicant will be issued with a conditional approval (CA). 

The CA will enable the airport operator to apply for an AC from the CAAM. To do this, the applicant must submit the prescribed form (available at the CAAM), pay the prescribed fees and provide the requisite supporting documents and information. If the documents and information are satisfactory to the CAAM, the CAAM will issue an AC to the applicant. 

The MAVCOM will issue the AOL after a valid AOC is issued. 

As both regulatory bodies are empowered to prescribe new guidelines or requirements deemed necessary for these applications from time to time, an applicant must verify the latest guidelines or requirements prescribed before an application is made.

Economic regulation

Is there a system of economic regulation of airports? How does it function?

The MAVCOM is empowered to regulate economic matters, including airports. Specifically, in terms of aerodrome operators, the 2016 Code requires the aerodrome operators to designate points of arrival or departure with clear signage and basic information to ease movement by users of airports.  

Complaints by consumers on non-compliance of the Code are heard and determined by the MAVCOM.

Access

Are there laws or rules restricting or qualifying access to airports?

Under the Civil Aviation Act 1969, the Minister of Transport is empowered to make secondary legislation regulating the use of or restricting the entry to aerodrome as may be expedient. There is a specific provision enabling the Minister to declare an area at or within the aerodrome as a controlled area, thereby restricting access if it is necessary for the safety of air navigation or for securing the efficient operation of any aid to air navigation.

Slot allocation

How are slots allocated at congested airports?

The MAVCOM is responsible for monitoring the management of the slot allocation process. Slot allocation is carried out by the National Slot Coordination Malaysia in accordance with the International Air Transport Association Worldwide Slot Guidelines (WSG). 

In Malaysia, although only the Kuala Lumpur International Airport is classified as a Level 3 airport, the NCSM undertakes slot coordination at all airports, regardless of the congestion level, based on the WSG principles. Adjustments are made based on certain local parameters at Malaysian airports, such as aircraft parking stands or gates, operating hours, runway and terminal capacity and passenger flow.

Ground handling

Are there any laws or rules specifically relating to ground handling. What are they?

Access to the market is regulated by licensing requirements. An operator must have a ground handling licence (GHL) issued by the MAVCOM to undertake these services. 

An applicant is required to have a valid Technical Approval (TA) issued by the CAAM before a GHL can be issued. To obtain both the GHL and TA, the procedure requires an applicant to first submit an application to the MAVCOM for a GHL by submitting the prescribed form (available at the MAVCOM), paying the prescribed fees and providing the requisite supporting documents and information, such as the following: 

  • documentation in relation to the applicant company;
  • details of the applicant’s organisational structure;
  • details regarding the applicant’s financial status and projections;
  • details of the applicant’s equipment and staffing;
  • details of the applicant’s current operations and proposed business plan for the next five years;
  • technical approval; and
  • fit and proper declaration in the prescribed form (available at the MAVCOM).

 

If the documents and information are satisfactory to the MAVCOM, the applicant will be issued with a CA. 

The CA will enable the applicant to then apply for a Technical Approval (TA) from the CAAM. To do this, the applicant has to submit to the CAAM the prescribed form (available at the CAAM), pay the prescribed fees and provide the requisite supporting documents and information. If the CAAM finds the documents and information satisfactory, it will issue a TA to the applicant. 

The MAVCOM will issue the GHL after a valid TA is issued. 

In terms of competition, presently, there are no specific guidelines applicable to ground handling services.  The general Competition Guidelines are relevant.

Air traffic control

Who provides air traffic control services? And how are they regulated?

The air traffic control of the Malaysian airspace is managed by the Air Traffic Management Division of the CAAM. This Division is primarily responsible for the safe, orderly and expeditious flow of air traffic. 

Liability and accidents

Passengers, baggage and cargo

What rules apply in respect of death of, or injury to, passengers or loss or damage to baggage or cargo in respect of domestic carriage?

Liability in respect of death of, or injury to, passengers or loss or damage to baggage or cargo in respect of domestic baggage is governed by: (1) the Carriage by Air Act 1974 (the CBA Act 1974) read together with the First Schedule of the CBA Act 1974, which incorporated the Convention for the Unification of Certain Rules relating to International Carriage by Air, known as the Warsaw Convention as amended at The Hague in 1955; and (2) the Carriage by Air (Amendment) Act 2007 read together with the Fifth Schedule and Sixth Schedule of the CBA Act 1974, which incorporated the Montreal Protocol No. 4 of 1975 to amend the Warsaw Convention and the Montreal Convention 1999 on air carrier liability (the Montreal Convention). 

Since its establishment, the Malaysian Aviation Commission has sought to regulate the dispute mechanism in respect of certain liability matters through the Malaysian Aviation Consumer Protection Code 2016.

Surface damage

Are there any special rules about the liability of aircraft operators for surface damage? What are they?

There are no special rules about the liability of aircraft operators for surface damage.  

Accident investigation

What system and procedures are in place for the investigation of air accidents?

Malaysia adopts the standards and recommended practices for investigation of air accidents under Annex 13 to the Chicago Convention. In reality, such investigations come under the purview of the Air Accident Investigation Bureau (AAIB), which is under the supervision of the Ministry of Transport. The pilot-in-command of the aircraft involved in the air accident is required to immediately notify the AAIB of the accident or if the pilot-in-command is killed or incapacitated, the owner, operator or hirer of the aircraft is required to do so. The Minister is empowered to appoint investigators and to designate an investigator-in-charge to organise and supervise the overall investigation. The fundamental objective of this investigation is for the prevention of accidents and incidents in the future, and not for the purpose of apportioning blame or liability. 

Accident reporting

Is there a mandatory accident and incident reporting system? How does it operate?

Upon the occurrence of an air accident or incident, it is mandatory for the pilot-in-command of the aircraft to immediately notify the AAIB of the accident or incident or if the pilot-in-command is killed or incapacitated, the owner, operator or hirer of the aircraft is required to do so (if applicable). 

The accident or incident shall be reported by submitting the prescribed form (available at the AAIB) and provide the following details:

  • classification of the accident or incident;
  • details of the aircraft or flight;
  • detail of the owner or operator;
  • date and time of the event;
  • last point of departure and point of intended landing of the aircraft;
  • last known position;
  • number of crew and passengers and their respective conditions;
  • qualification of the pilot-in-command and nationality of crew and passengers;
  • description of the accident or incident;
  • presence and description of dangerous goods onboard the aircraft;
  • operational nature of the flight; and
  • level of damage to aircraft.

 

Competition law

Competition law

Do sector-specific or general competition rules apply to aviation?

The Malaysian Aviation Commission Act 2015 introduces sector-specific competition rules to the aviation market. The Malaysian Aviation Commission (MAVCOM) has since issued and published the Competition Guidelines. 

Regulator

Is there a sector-specific regulator, or are competition rules applied by the general competition authority?

The MAVCOM is a sector-specific regulator for competition rules in respect of the aviation market. 

Market definition

How is the relevant market for the purposes of a competition assessment in the aviation sector defined by the competition authorities?

Under the Guidelines on Aviation Service Market Definition issued by the MAVCOM, the Hypothetical Monopolist Test is relevant for the purposes of assessing the aviation market. The Test consists of the service market and the geographic market.

The determination of the service market involves the identification and evaluation of the Focal Aviation Service. In so doing, the regulator considers whether a hypothetical monopolist of a service market for the Focal Aviation Service would be able to profitably raise the price of the service by a Small but Significant Non-transitory Increase in Price (SSNIP) to decide whether the Focal Aviation Service should be widened or otherwise. In addition, the regulator may also consider the demand-side substitution and the supply-side substitution. 

The determination of the geographic market involves the identification and evaluation of the focal area.  In so doing, the regulator considers whether a hypothetical monopolist of a relevant service operating within that focal area would be able to profitably raise the price of the service by a SSNIP to decide whether the focal area should be widened or otherwise. In addition, the regulator also considers the demand-side substitution and the supply-side substitution.

Code-sharing and joint ventures

How have the competition authorities regulated code-sharing and air-carrier joint ventures?

Code-sharing and air-carrier joint ventures are regulated by the MAVCOM and the Competition Guidelines. Generally, the Act prohibits an agreement between enterprises that has the object or effect of significantly preventing, restricting or distorting competition in the market. The Guidelines on Anti-competitive Agreements expressly includes airline code-sharing agreements and partnership or joint venture agreements as agreements that could fall foul of the prohibition.  

Assessing competitive effect

What are the main standards for assessing the competitive effect of a transaction?

To assess the competitive effect of a transaction, the main standard for assessment is whether the agreement has the object or effect of significantly preventing, restricting or distorting competition in any aviation service market. In assessing this, the regulator considers whether the agreement has the effect of (1) fixing prices or other trading conditions, (2) sharing aviation service market or sources of supply, (3) limiting or controlling production, market outlets or market access, technical or technological development or investment, or (4) bid rigging. 

Remedies

What types of remedies have been imposed to remedy concerns identified by the competition authorities?

Pending completion of the investigation and determination of infringement, the MAVCOM may issue the necessary directions as an interim remedy to address the concerns identified. For example, directions requiring the alleged infringing party to suspend the effect of the alleged prohibited agreement or to desist from any alleged infringing conduct.

In the event of a determination of infringement, the MAVCOM may require the infringement to cease immediately, specify appropriate steps to be taken by the infringing enterprise to remedy the infringement or impose a financial penalty not exceeding 10 per cent of the worldwide turnover of the enterprise during the period of infringement. In the event of refusal to comply, an application may be made to a court for a compliance order. Failure to comply with the compliance order constitutes contempt of court.

Financial support and state aid

Rules and principles

Are there sector-specific rules regulating direct or indirect financial support to companies by the government or government-controlled agencies or companies (state aid) in the aviation sector? Is state aid regulated generally?

There are sector-specific rules governing financial support (known as government subsidies in a local context). The Civil Aviation Authority of Malaysia Act 2017 establishes the Civil Aviation Authority of Malaysia Fund to capture, among other things, such funds as may be approved and provided to pay for the expenses of matters under the purview of the Civil Aviation Authority of Malaysia (CAAM). The Malaysian Aviation Commission Act 2015 provides for the establishment of the Aviation Commission Fund to capture, among other things, such funds as may be approved and provided to pay for the expenses of matters under the purview of the MAVCOM. Financial support to operators serving the public service obligation routes is funded through the Public Service Fund.

There is financial support through government or government-controlled agencies or companies in the sector, which are regulated through other general legislation.

What are the main principles of the state aid rules applicable to the aviation sector?

The sector-specific regulations are intended to regulate, in general, the nature of such funds and the manner in which such funds may be applied. There are no specific principles prescribed. 

Exemptions

Are there exemptions from the state aid rules or situations in which they do not apply?

There are no exemptions prescribed in the aviation-specific regulations. 

Clearance of state aid

Must clearance from the competition authorities be obtained before state aid may be granted? What are the main procedural steps for doing so?

The regulations do not require specific clearance to be obtained before financial support may be granted.  The process for applying for financial support for the aviation sector is not publicly known.

Recovery of unlawful state aid

If no clearance is obtained, what procedures apply to recover unlawfully granted state aid?

The process for recovering unlawfully granted financial support for the aviation sector is not publicly known.

Consumer protection

Passengers

What rules regulate denied boarding, cancellation or (tarmac) delay?

Generally, damage occasioned by delay, be it to passengers, baggage and cargo, is governed by the Montreal Convention, which has been incorporated into the Carriage by Air Act 1974. 

Since the establishment of the Malaysian Aviation Commission (MAVCOM), it has issued and published the Malaysian Aviation Consumer Protection Code 2016 (the 2016 Code) to regulate liability and compensation relating to denial of boarding and flight delay or cancellation. The 2016 Code specifies conduct expected of the airline in such an event and governs the compensation applicable. Disputes regarding matters prescribed by the 2016 Code shall be heard and determined by the MAVCOM. 

Package holidays

What rules apply to the sale of package holiday products?

The 2016 Code prohibits airlines from automatically adding optional services to a customer’s purchase and requires the airline to communicate these services in a clear, transparent and unambiguous way.

In addition to the 2016 Code (which is aviation-specific), service providers should ensure their trading practices do not fall foul of other consumer-related legislation, such as the Consumer Protection Act 1999 and applicable common law principles.

Other consumer legislation

Is there any other aviation-specific consumer legislation?

The 2016 Code is intended as the aviation-specific guidelines for the protection of consumers. 

Insurance and security

Insurance for operators

What mandatory insurance requirements apply to the operation of aircraft?

The regulations do not contain specific mandatory insurance rules for operation of aircraft. This is regulated by the Civil Aviation Authority of Malaysia (CAAM) through notices or directives in relation to licensing requirements. Aviation insurance is usually listed as a mandatory licensing requirement in those notices or directives.

Aviation security

What legal requirements are there with regard to aviation security?

Aviation security is now regulated by the Civil Aviation (Security) Regulations 2019 (the CAS Regulations 2019). The CAS Regulations 2019 established the National Civil Aviation Security Authority (the Security Authority), which is empowered to safeguard the civil aviation against any unlawful interference and to regulate the security of the civil aviation in compliance with Annex 17 to the Chicago Convention. For this purpose, the Security Authority is empowered to establish and implement national security programmes comprising primarily of:

  • the National Civil Aviation Security Programme (NCASP) for the safeguarding of civil aviation operations against any act of unlawful interference;
  • the National Civil Aviation Security Training Programme for ensuring that security awareness and function-specific training are provided to persons involved in the implementation of the NCASP; and
  • the National Quality Control Programme for determining the compliance with and validating the effectiveness of the NCASP. 

 

The Security Authority may issue appropriate directions to the aviation service providers to establish similar programmes or to allocate tasks or coordinate civil aviation activities between the service providers.

Serious crimes

What serious crimes exist with regard to aviation?

Serious crimes are governed by the Aviation Offences Act 1984, which is intended to give effect to:

  • the Convention on Offences and Certain other Acts Committed on Board Aircraft signed at Tokyo on 14 September 1963;
  • the Convention for the Suppression of Unlawful Seizure of Aircraft signed at The Hague on 16 December 1970;
  • the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation signed at Montreal on 23 September 1971; and
  • the Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation concluded at Montreal on 24 February 1988. The Protocol deals with serious crimes such as hijacking of aircraft, destroying, damaging or endangering the safety of aircraft, violence against passengers and crew or any acts of violence that destroy or seriously damage any facility of an airport serving civil aviation.  

Update and trends

Emerging trends

Are there any emerging trends or hot topics in air transport regulation in your jurisdiction?

The recent downgrade of Malaysia’s air safety rate after assessment of the Civil Aviation Authority of Malaysia (CAAM) from Category 1 to Category 2 by the Federal Aviation Administration gave rise to a debate on whether to review the regulatory framework and implementation of the existing framework. This led to an announcement by the Malaysian government in December 2019 that the Malaysian Aviation Commission (MAVCOM) may be dissolved to allow its functions to be absorbed by the CAAM. A comprehensive review of the existing regulatory framework would be necessary to merge the functions of the CAAM and the MAVCOM, if the restructuring of the regulatory bodies takes place. 

Another hot topic in the Malaysian aviation industry is whether the time has come for the entry of multiple private airport operators to operate and manage airports providing civil aviation services to facilitate a more openly competitive environment with a view to improve service levels. Presently, Malaysia Airports operates and manages most of the airports providing civil aviation services in Malaysia.

Law stated date

Correct on:

Give the date on which the above content is accurate.

The above content is accurate as at 31 December 2019.