4 November 2014
“After years of denying the financial implications of the ‘scandalous klia2′, we are now seeing that the burden of the multi-billion ringgit cost overrun will be shifted to ordinary Malaysians.
“Worse, klia2 has become a missed opportunity for Malaysia to become the hub of low-cost air travel in the Asia-Pacific as a result of lost poor management in MAHB and weak controls by the government,” said DAP national publicity secretary and Petaling Jaya Utara Member of Parliament, Tony Pua
He said both the Ministry of Transport and Malaysia Airports Holdings Bhd (MAHB) had repeatedly denied the potential negative financial consequences of the RM4 billion “low-cost” klia2 which exceeded its original budget of RM1.7 billion.
“In fact, MAHB chief financial officer, Faizal Mansor asserted to the Public Accounts Committee in a meeting earlier this year that the cost overrun will not require MAHB to raise airport and passenger taxes and fees to remain financially strong and profitable.
“However, in the third quarter earnings report ending September 2014, the first financial report after the commencement of operations of klia2, the airport operator saw its net profit plunge 98.6% from RM112.78 million to a paltry RM1.61 million a year ago,” he said in a statement.
In the report to Bursa Malaysia yesterday, MAHB said the steep profit decline was mainly due to higher costs incurred by the new “low-cost” carrier terminal, as well as higher financing costs on borrowings incurred for the construction of the terminal.
“To quote the English idiom, the chickens have finally come home to roost.
“MAHB now suffers the double-whammy of not only having to account for higher depreciation cost of klia2 as a result of the massive cost overrun.
“As a result of the bloated RM4 billion or more to build klia2, the company was forced into a borrowing spree to raise the necessary funds to finance the airport,” said Pua.
He said in 2010, it raised RM3.1 billion via a 15-year Islamic Medium Term Notes (IMTN) Programme while last year, it had to raise another RM2.5 billion via a 20-year Senior Sukuk Programme and a Perpetual Subordinated Sukuk Programme.
The borrowing-spree hence caused substantially higher financing cost for MAHB and as earnings and cash-flow declined sharply for the airport operator, it was clear that MAHB would appeal to the government to approve massive increases in airport and passenger taxes, and the government would in-turn be hard pressed not to approve the hike in order to bail out MAHB.
According to media reports on MAHB analyst briefings, the operator has already proposed to the government to increase domestic klia2 charges by 50% from RM6 to RM9.
For international passengers, the hike is even steeper at more than 100% from RM32 to RM65.
“Without these price hikes, it is clear from the warning provided by MAHB’s latest quarter financial reports, the company will not be able to fulfil its debt obligations when they become due starting 2023,” he added.
Original Source: www.therakyatpost.com