Wednesday, January 28, 2009

KLIA East - my opinion

I was attracted to a news entry at the Malaysia Insider that one of the most popular blogger, Kenny Sia, voiced his support to Air Asia on the newly proposed Budget air terminal located in Labu, aka KLIA East.

A little background on this:

Air Asia, teaming up with Sime Darby Berhad, is pushing for a PFI (Private Funding Initiative) project to build a new budget air terminal at Labu, approximately 10Km away from KLIA.

Of course, Malaysia Airports Holdings Berhad, the manager of the KLIA, is opposing the move, claiming that KLIA does have a similar plan and objective, aka KLIA North.

Thus, the two sides exchanges, and it seems Air Asia won the first round when the Government announced the project, however, was subsequently depressed by the same Cabinet to call for a review of the project.

From the surface, it is easy to understand why Khazanah, the Government Investment arm, which owns both Sime Darby and Malaysia Airports Holdings Berhad (MAHB), prefers not to have an airport outside MAHB's control. Furthermore, Khazanah is also the major shareholder of the National Carrier, Malaysia Airline Systems (MAS).

Should Air Asia successfully built the airport, MAHB and MAS will stand to loose the most.

It looks like Air Asia is the victim of the alleged unfair practice by MAHB to deter Air Asia from advancing into otherwise territory of MAS.

This many favoured Air Asia to run it's own airport instead. The supporters of KLIA East argued that with airport within Air Asia's control, the budget carrier will be able to manage the airport more efficiently hence able to maintain low fare.

I do have doubts, perhaps my doubts may have been brought up by others, or it may have already been answered by either sides, but I am still wanted to raise here.

Why should Khazanah openly oppose the KLIA East project whereas it can choose to reason to the Cabinet before the announcement is made.

Khazanah, having representatives sitting both in MAHB and Sime Darby. For such a deal with Air Asia, Sime Darby Board would have been brief, or endorsed the project. Why Khazanah did not block the project at the Board level and instead chose to object openly in public?

According to Air Asia, MAHB seems unfair to Air Asia. MAHB is trusted to manage the airports, not to practice differentiation among its clients, i.e. MAS and Air Asia.

Both MAS and Air Asia are home grown carriers, and both contribute significantly to the nation's tourism revenue, why should both carriers be treated differently?

Should MAHB fees to carriers be revised to encourage more carriers, and to ensure that the fees are affordable to budget carriers. Is there anyone conducting a study on why KLIA is only handling 10% of its passenger capacity and still seeing local budget carrier wanted to part from KLIA?

Is Government intervention required to ensure that MAHB is competitive compare to other regional airports such as Singapore and Bangkok? What is the reason behind carriers pulling out from landing in KLIA? Besides reduced number of passengers, what MAHB has done to attract new carriers, or even effort to retain existing carriers to use KLIA?

Given Sime Darby as a Khazanah company, the project should not be labeled as Private Funding Initiative (PFI) instead. Ultimately, it is the nation who owns part of the business, i.e. the land owned by Sime Darby. Thus, the Government should make it clear that public fund, including funds and assets owned by the state-owned companies, is handle in good care.

I see two problems here:

1. MAHB did not manage KLIA well. If MAHB follow the style of other airports where both budget and full service carriers are serving at the same place, at an attractive fee, KLIA will probably maximise its available capacity. Thus, MAHB should review and relook into how to accomodate budget carriers in the main airport instead of separating them to LCCT or KLIA North, or losing the business.

2. Sime Darby should answer the reasoning behind teaming up with Air Asia. Is this move pure profit driven where the investment is expected to be fruitful? What if the project failed? Who is bearing the consequences? Sime Darby board? Khazanah? the Government? or the tax payers?

I see no reason for another airport, if MAHB failed to accommodate Air Asia's requests (or demand if you like), the Government should then replace the whole management team of MAHB, or take back the control of KLIA, or sell to a independent party with conditions that KLIA should and forever will accommodate all types of carriers with the intention to reduce wastage benefiting the Nation.

In short, until KLIA capacity is reaching its peak, there should be no additional airport.

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