With the implementation of the Good and Services Tax (GST) next year, tickets for local flights might cost 6% more for local destinations if the extra cost is not absorbed by the airlines. International flights, on the other hand, will cost 1% more.
According to a Maybank Investment Bank Research report in The Star, domestic flights will be affected the most because the ticket prices will be subjected to the standard GST rate. International flights are zero-rated.
“It will be a challenge for the airlines to fully pass on the GST to consumers as a 6% higher ‘all-in’ ticket price is drastic and will have an impact on demand.
“Secondly, passenger service charge (PSC) for both domestic and international flights is subject to GST as well.”
The report said that the PSC will most likely be raised to reflect the legal rate under Malaysia Airports Holdings Bhd’s (MAHB) operating agreement with the Government. Also, the report stated that the Government was supposed to grant an increase in PSC on February 12, but decided against it.
“Therefore, MAHB imposes marginal cost support on the difference between actual versus statutory rate against the Government’s portion of revenue share. This is part of the compensation measure framework under the operating agreement.”
Currently, MAHB’s PSC for departing international passengers stands at RM32 for KLIA2 and RM65 for international airports. It is unclear as to why the Government is maintaining the old rate, but, according to Maybank IB, it will only be a matter of time before it is raised.
To read the full report by The Star, click here.
Story and quote from: The Star
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