18 November 2020
Maybe the timing is not right. Or maybe it’s apt, for Datuk Seri Dr Zambry Abdul Kadir.
The former Perak Menteri Besar joined Malaysia Airports Holdings Bhd (MAHB) as its chairman when the aviation sector was facing its worst crisis.
Global demand for air travel has been battered by the closure of international borders to contain the virus spread since the emergence of Covid-19 in early 2020. This has taken a heavy toll on airlines and airport operators worldwide.
Given that airports are arguably the most fundamental infrastructure for any country to bolster its socio-economic development, the crisis has provided a very stern challenge for Zambry to ensure that the local aviation sector remains a key enabler of Malaysia’s economic activities.
The sector contributed 3.5 per cent to the country’s gross domestic product in 2019.
“As a national aviation infrastructure, our airports must remain operational no matter what. While we hear of airline companies collapsing due to the pandemic, closing down airports is not a conceivable option for the nation,” Zambry told the New Straits Times and Berita Harian in his first media interview since being appointed three months ago.
“All parties must work together to achieve faster recovery. The importance of collaboration with airlines, retail partners and the government is essential for us to recover and sustain all businesses related to the airports,” he added.
Government support crucial
Zambry said government support would be crucial for MAHB to help airlines and retail partners survive the pandemic.
MAHB manages 39 local airports including Kuala Lumpur International Airport (KLIA) and klia2.
It also owns and manages Istanbul Sabiha Gokcen International Airport in Turkey, which was ranked as the fifth busiest airport in Europe by the European Organisation for the Safety of Air Navigation in October.
“With the expected prolonged impact, some forms of support will be needed from the government. This is in line with Airports Council International’s (ACI) call to governments worldwide to provide support.
“Most countries have already done so – Singapore, Thailand, Indonesia and Hong Kong included. We have put in our request for some support,” he added.
Zambry noted that there was an urgent need for relief packages to sustain long-term recovery of airports, given their importance as an engine of economic growth, wealth creation and employment.
“Airports employ, either directly or indirectly, more than 6.1 million globally which makes up 60 per cent of all employment in the aviation sector. This provides direct societal and economic benefits to the local, regional and national communities they serve,” he said, quoting ACI figures.
Citing an example, he said measures by the Singapore government included jobs support scheme (which provides employers with wage support to retain employees), enhanced aviation support package (which funds measures such as rebates on aircraft landing and parking charges, and rental relief for airlines, ground handlers and cargo agents).
Doing its bit for retail and airline partners
MAHB, he said, would continue to support its partners. This was reflected in the payment moratorium and several other relief packages for both retailers and airlines.
The company has offered a moratorium on monthly payments of up to six months for its retail and airline partners.
“The rental relief packages amounted to RM22 million for 650 small to mid-sized retailers with a 50 per cent rebate on their rental payments for six months in 2020 to help ease their cash flow,” Zambry said.
MAHB will introduce another relief package for the new retail rental model in January next year.
Retailers under the commercial reset initiative will get up to 30 per cent reduction from their current rental rate. This will result in a total savings of RM45 million for the retailers.
As part of its Airports 4.0 initiative to transform KLIA into a digital airport, MAHB has launched shopMYairports e-commerce platform to help retailers expand their market beyond the airport.
MAHB has also introduced Network Reconnecting Programme for its airline partners to facilitate the resumption of flight routes.
Under the programme, airlines will get a discount on aeronautical charges based on the passenger volume that they bring in.
So far, it’s “okay”
So far, MAHB has been able to weather the crisis, thanks to its strong cash position and aggressive cost-cutting measures.
“This has helped us defray our operating costs from the time when we began to feel the effects of the travel ban,” Zambry said.
As at June this year, MAHB’s cash position stood at more than RM2 billion.
Additionally, the company is able to secure credit facilities from various supportive financial institutions with its strong fundamentals and “AAA” credit rating.
“This has allowed us to retain our full workforce thus far. The majority of our workforce is highly trained and specialised in their respective roles. Letting go of such staff is not necessarily the best option in the long run.
“We have to ensure immediate readiness of our operations once travel resumes in earnest. But this has only been possible because we have embarked on very immediate and aggressive cost-cutting measures in other areas,” he said.
MAHB’s target is to reduce its operating costs by 20 per cent. This is by shutting down underutilised terminal areas, paring down all non-critical expenses and re-organising staff shift patterns to reduce staff costs.
“We have deferred most of our major capital expenditures except for mission-critical asset replacement exercises such as runway upgrades, baggage handling and aerotrains. Apart from that, we are aggressively recouping our receivables from key parties,” he said.
But how long?
Zambry, nevertheless, is worried that a prolonged Covid-19 crisis would deplete MAHB’s reserves.
“We have invested significantly in ensuring a safe and seamless airport experience for all airport guests. This includes exploring ways to reduce bottlenecks at critical touchpoints that have resulted from new standard operating procedures (SOPs),” he added.
“The expected recovery from Covid-19 for aviation has been extended to 2023-2024. Nevertheless, we hope that various safety measures undertaken by the government can result in the future implementation of travel bubbles,” he said.
Still, Zambry and MAHB remain optimistic as historically, the local aviation industry is inherently resilient.
Although traffic growth is still constrained by the extended international border closure, the optimism is there due to the gradual easing of travel restrictions, particularly for medical tourists, expatriates, Malaysia My Second Home pass holders, foreign students, permanent residents and foreign spouses of Malaysians, as well as the MY-SG Reciprocal Green Lane.
“We hope with all the safety and control measures taken by the government in battling the recent spike of the pandemic, we will soon overcome the third wave and the government can resume talks on plans for the travel bubble towards the recovery of air travel,” he said.