A low-cost airline just lost its right to fly over budget and safety issues

Over the last five years, there has been an explosion of newly-launched budget airlines for select markets. In Europe, Iceland's Play and Norway's Norse launched right before and after the pandemic while a new airline called FlyAtlantic is preparing to launch out of Northern Ireland's Belfast in 2025.

Along with longtime players like Spirit  (SAVE) - Get Free Report and Frontier  (FRON) - Get Free Report, there is now a newcomer called Avelo in the U.S. while Asia saw four new low-cost airlines launch out of Thailand alone in 2023.

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But as all these airlines try to carve out a space in a given market, many are also inevitably running into budget, safety and certification issues. In Malaysia, the country's aviation authority temporarily revoked the Air Operators Certificate (AOC) of a new carrier called MYAirline after the airline started running flights to nearby cities in December 2022 and then abruptly stopped all service on Oct. 12.

'The constraints of time have left us with no alternative,' airline says

"We have worked tirelessly to explore various partnership and capital-raising options to prevent this suspension," the airline's board of directors said in a statement posted to social media. "Unfortunately, the constraints of time have left us with no alternative but to take this decision,” the airline's board of directors said in a statement.

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Abruptly canceling 40 flights within a few days left many travelers stranded at airports across Malaysia. MYAirline had initially planned to expand service both within Malaysia and to nearby countries such as Singapore, Thailand and Vietnam by the end of 2023 but talks with partners that would provide the airline with financial backing fell through at the last minute.

While the airline wanted to continue to look for a partnership that would resolve its budget problems and allow it to restart operations, the Civil Aviation Authority of Malaysia (CAAM) suspended MyAirline's AOC for 90 days to investigate the chaos caused by the canceled flights.

In announcing the decision, the government authority said that being able to "provide evidence indicating financial solvency to CAAM" is an integral part of the "airline's safety audit."

Here is what needs to happen for MYAirline to start flying again

The government authority further said that suspending dozens of flights all at once "raises serious concern on public safety and the overall integrity of civil aviation operations in Malaysia."

To regain its AOC, MYAirline will need to pass a new safety audit which includes being able to demonstrate the financial ability to meet its business and expansion plans. According to the Malaysia's aviation authority, no indication that the airline was "in financial distress" was brought up by its leaders during an audit conducted in June 2023.

In response, MYAirline acknowledged the "communication challenges" with CAAM and the Malaysian Aviation Commission (MAVCOM) while also saying that the "abrupt action was taken out of a genuine concern for the safety of our passengers."

"We acknowledge and understand the frustration experienced by our passengers," MYAirline' s Interim Accountable ExecutiveDato' Sri Azharuddin A. Rahman said in a statement. "This situation arose due to our lack of a contingency plan, compounded by a last-minute investor withdrawal."