3 March 2014
Already reeling from lower profits, Malaysian budget airlines expect to lose more passengers and money if the proposed international passenger service tax (PSC) at the new klia2 terminal is the same as the RM65 charged at the KLIA now, say analysts and sources.
The Malaysian Insider understands that budget airline officials have been told to brace for a PSC as high as RM65, double the RM32 now charged at the current low-cost carrier terminal (LCCT) by operator Malaysia Airports Holdings Bhd (MAHB). Among the budget carriers at the LCCT are AirAsia, AirAsia X and Cebu Pacific Air.
"They are talking about rates near or equal RM65 in briefings to analysts," one analyst told The Malaysian Insider, adding this would help MAHB recoup faster from klia2’s construction delays.
The RM4 billion klia2 budget terminal is to open on May 2 after a year of delays with Putrajaya and MAHB insisting that it can finally meet the latest deadline.
"This is already a tough year for budget airlines at the crowded LCCT and a higher PSC in klia2 will just make full service carriers and budget carriers the same.
"So which airlines would passengers chose? Of course the full service carriers," an aviation industry official told The Malaysian Insider.
The industry official said the higher PSC charge, which has been up for review since last month, would discourage locals from flying and also put a damper on the plans of budget travellers who might travel to Malaysia on a whim for Visit Malaysia Year 2014.
"They give incentives to other airlines to land in KLIA and should continue to do the same for budget airlines.
"It’s not like they are not making money now," he added, referring to the country’s main airport operator MAHB.
In a statement issued on February 21, MAHB had said that its financial performance had been showing consistent profits annually since its incorporation 22 years ago.
"Over the last 15 years since being public listed, MAHB has continually paid the concession fees and taxes to the government, issued dividends to shareholders, paid incentives to airlines, and remained profitable," the operator had said in response to AirAsia group chief executive Tan Sri Tony Fernandes‘s statements on financial performances of MAHB and loss-making flag carrier Malaysia Airlines.
MAHB had also said that since 2002, AirAsia had benefitted from MAHB’s strong financial performance as the budget carrier received the most incentives over the last 10 years, "despite it not being the airline that contributed the highest number of passengers or revenue".
"MAHB had specifically introduced an incentive programme to support the growth of AirAsia, at its infancy stage. This had facilitated AirAsia’s growth to become the successful airline that it is today," it had added.
The airport operator saw nett profit for the fourth quarter ended December 31, 2013, fall by 37.8% to RM48.5 million from RM78 million a year ago, on high user fee, staff costs, repair and maintenance costs as well as utilities costs.
Revenue for the quarter also fell by 15.6% to RM1.1 billion from RM1.3 billion a year ago.
For the financial year ended December 31, 2013, MAHB’s nett profit fell 1.4% to RM388.9 million from RM394.5 million a year ago, although revenue rose 15.5% to RM4.1 billion from RM3.5 billion a year ago.
In January, MAHB said it was confident of showing a 9.7% growth in passenger traffic for 2014, and pointed out that a five-yearly review for the PSC was due in February but Putrajaya would have the final say.
Last year, MAHB posted 18.4% passenger growth with a total of 79.5 million passengers passing through its 39 airports.
The 9.7% forecast growth exceeds the global passenger growth of between 4.5% and 6% this year projected by the International Air Transport Association, International Civil Aviation Organisation and Airports Council International.
In contrast, AirAsia, Asia’s biggest budget airline by passenger traffic, saw its fourth-quarter profit drop 19% on higher expenses for fuel and aircraft maintenance.
Nett profit for the three months ended December 31, 2013, fell to RM245.4 million while nett profit for the full year stood at RM364.1 million compared to RM789.6 million in 2012 due to the prior year’s gain from a disposal of shares in its Thai subsidiary.
The company hopes to reduce costs by another 7.5% this year, according to Fernandes in a press statement, after operating expenses in 2013 rose 6.4% from a year ago.
But a higher PSC could squeeze its margins despite cost-cutting.
In 2011, AirAsia had protested the Transport Ministry’s nod to MAHB to increase the PSC at the LCCT from RM25 to RM32 for departing international passengers – after a two-year deferment.
The budget carrier then launched an online petition entitled "MAHB: Reverse the enforced increment of PSC" on top of putting up "Say No to Airport Tax Increase" stickers at the LCCT and on Fernandes’s car.