CAAM Downgraded: No Material Impact?

On 11 November 2019, the U.S. Federal Aviation Administration (FAA) downgraded Civil Aviation Authority of Malaysia (CAAM) to Category 2 regulator. CGS-CIMB Research (Nov 12, 2019) had the headline “No material impact on aviation sector...” as reported in The Edge Financial Daily (Nov. 12, 2019). Is that true?

Granted FAA’s downgrade is not on assessment of the safety of airlines, airports and air traffic control services in Malaysia, the dire implications remain. CAAM, in FAA’s judgment, may not be able to perform regulatory oversight due to its various shortcomings. And that has issues on airlines, tourism promotion, code-share, new routes to the U.S. and so forth.

MAS will lose its code-share arrangement with American Airlines. Air Asia cannot increase services to the U.S. Japan and South Korea may impose restrictions on MAS and Air Asia. Higher cost for sale and leaseback transactions for Air Asia. Tourism Malaysia’s plans to promote 2020 as Visit Malaysia Year will now be in jeopardy. Public perception of Malaysia’s carriers can turn negative, Malaysian pilots and engineers are not employable outside Malaysia and repair and overhaul business is now curtailed.

Why the downgrade? Many industry professionals and academicians have forewarned the inherent weaknesses of CAAM. Insufficient staff, poor retention rate, underpaid, audit follow-up weaknesses all pointed to a looming disaster. After MH 17 and MH 370, surely the regulator and aviation experts would have examined how best to improve regulation and services. Not really, we believe in the Malaysian way – mediocrity rules the day! A CAAM Board member said if Tony (Fernandes) did not launch flights to Honolulu, the FAA would not have come in the first place! Actually, if we have had no local airline or aircraft we will not be in this position!

Our PM said he was not aware of the details of the downgrade. The downgrade places us in the same group as Thailand, Bangladesh, Ghana and Costa Rica. To return to Category 1 will take us about two years. Thailand was downgraded in 2015 but has yet to return to Category 1.

So what can we learn? A major overhaul is necessary at CAAM. Rectifying shortcomings and having a vision will be helpful. Getting back to basics, diversity and meritocracy in employment, and setting excellence in standards are something to pursue if new Malaysia is to take hold. Otherwise, we will never be ready to meet international standards in any field.

References:

1. FAA downgrade has nothing to do with safety of Malaysia’s aviation sector, The Edge Financial Daily, 13 Nov 2019

2. No material impact on aviation sector seen FAA downgrade, The Edge Financial Daily,
14 Nov 2019

3. Malaysia’s aviation industry bogged down by inherent weaknesses – Maybank, Bernama, 12 Nov 2019

4. US downgrades Malaysia’s air safety rating, Channel News Asia, 12 Nov 2019