19 July 2021
The government will need to tweak its operating agreement with Malaysia Airports Holdings Bhd (MAHB) in particular the concession to operate Malaysia’s main gateway, the Kuala Lumpur International Airport (KLIA).
This is in return for a significant investment by MAHB to upgrade ageing assets particularly at the KLIA.
Sources said the current OA did not state MAHB should undertake maintenance works for airports and allocate capital expenditure for the construction/expansion of new building, baggage handling system (BHS) and aero train upgrade.
It is believed that the airport operator might undertake critical ageing asset replacements at the main terminal of KLIA this year.
This includes a 1.5km rail track and aerotrain as well as the 42km conveyor for the BHS.
An industry source said MAHB could exhaust its cash reserve if the upgrade was undertaken by itself without the government’s financial support.
MAHB had revised its plan to undertake a “physical” upgrading work for the main terminal of KLIA, prioritising the critical facilities that required an urgent upgrade.
The source said MAHB should be re-compensated to recoup its investment in the structural assetx – BHS and aerotrain upgrade.
“The government could extend the OA of the concession, giving longer ‘runway’ in favour of MAHB in terms of future repayment or adjust the annual user fee payment to the government, allowing it to recoup its investment,” the source told the New Straits Times.
Another source claimed that structural upgrade should be undertaken and had to be done during the pandemic as traffic was not high, making it more convenient from an operational point of view.
“But MAHB’s cashflow will be severely affected without the recurring income from both aeronautical and non-aeronautical revenue with less passenger traffic across the group’s network of airports,” the source added.
The source said investors would not favour the “upfront” payment (investment) by MAHB for the BHS and aerotrain upgrade due to dynamic and volatile situation that might delay investment’s return, thus pushing the airport operator in a limbo.
Major structural upgrades had previously been delayed due to the impending new OAs with the government.
This will give further clarity in terms of capex once the traffic returns, thus facilitating MAHB with the quantum needed to invest for future growth and airport expansion.
The new OA could also determine new funding mechanism for airport with options and flexibility for sustainable growth.
The government, via the Transport Ministry, had in April 2019 extended the current OA for MAHB to operate, manage and maintain airports throughout the country until February 11, 2069.
This allows MAHB to implement a commercial development plan sustainably while improving revenue-sharing with the government.
“If the government does not want to spend on the upgrade, MAHB should spend it. Although the airport owner should spend on it, but this is not the time to quibble if the service level at KLIA is down,” he added.
MAHB reportedly in June said it had slashed its planned RM1.8 billion capex for 2020 by 82 per cent as it embarked on an aggressive cost-optimisation plan amid the Covid-19 pandemic.
In an interview with MAHB late last year, chairman Datuk Seri Dr Zambry Abdul Kadir said the prioritised focus included its ageing aerotrain and BHS, runway upgrades, commercial reset for retailers, toilet refurbishment and Airports 4.0 digital initiative at selected local airports.
The 24-year old aerotrain were unable to accommodate KLIA’s 32 million passenger traffic annually as the trains were designed for a maximum capacity of 25 million passengers.
MAHB’s replacement exercise for the entire BHS at the main KLIA’s terminal had been mooted in early 2019, with an initial up to RM300 million capex allocation via open tender.
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