28 June 2021
Subang Airport’s revenue growth is tremendous due to the growing non-aeronautical revenue
MALAYSIA Airports Holdings Bhd (MAHB) targets to expand non-aeronautical segment revenue between 60% and 70% from its profitable airports compared to 50% pre-pandemic level.
KLIA Aeropolis Sdn Bhd head Randhill Singh said when the group manages to grow it to 60%-70%, the pressure to increase airport tax will be reduced.
“We will be able to use our non-aeronautical revenue to cross subsidise the non-profitable airports. We have 39 airports in our network and only seven airports are profitable.
“The Lapangan Terbang Sultan Abdul Aziz Shah’s (Subang Airport) revenue growth is tremendous due to the growing non-aeronautical revenue,” he told reporters during virtual media briefing “In Conversation with Malaysia Airports: The Rise of Subang Airport as Asia Pacific’s Preferred Maintenance, Repair and Overhaul (MRO) Hub” recently.
According to Randhill, Subang Airport is among the seven profitable airports that help MAHB in cross-subsidising and will further be enhanced by the Subang Airport Regeneration plan that could potentially be multiplied by four times of Subang Airport’s annual revenue by 2030
“Aeronautical revenue, such as passenger service charge, aircraft parking and landing charges, are highly regulated and Malaysia is already among the lowest in the world.
“The idea is to grow non-aeronautical and reduce reliance on aeronautical revenue. Hence, we need the government’s approval quickly for a clear decision, and any delay will jeopardise the industry further,” he added.
Although the Ministry of Finance has confirmed that Subang Airport and other local airports will not be sold, MAHB still needs to refer and confirm with the government the approval to implement the Subang Airport Regeneration plan.
MAHB is eyeing a total investment of RM1.3 billion on a regeneration project for Subang Airport as part of ongoing efforts to turn the airport into an aviation hub in the Asia-Pacific region.
The investment will be over five years and will be internally generated, bank borrowings and partnership from industry players.
Malaysia Aerospace Industry Association president Naguib Mohd Nor said there has been multiple takeover chatter in the past on Subang Airport and this spooks foreign operators.
He said the industry demands a clear and unwavering direction to progress the sector and Subang Airport is key to this, hence, the plans must be approved quickly.
“Any delay of implementation will impact operators’ timeline, investment strategy and, hence, decision to invest in Malaysia. Aerospace investors will look at Subang Airport as a high risk in their investment decision-making given it’s always exposed to such take-overs,” he said.
Naguib believes a new entity with the concession agreement with Subang Airport must have a long-term vision and understanding of the industry.
“The organisation must be able to assimilate the government’s strategy over a long period and invest within the period.
“They must have the technical knowledge and industrial aptitude to facilitate such technological investment as aerospace is a longterm investment between 10 and 20 years,” he said.
During the presentation, Randhill said Subang Airport is ready to uplift the industry to achieve 30%-50% of the national revenue targets and more than 19,000 job creation.
“Subang Airport is set to become foreign direct investment and domestic direct investment flow-magnet for more than 50 new global aerospace & MRO operators.
“It is one of the single most important enablers to a high-income nation with IR4.0-ready workforce,” he said.
KLIA Aeropolis is MAHB’s subsidiary tasked to undertake land development for the airport operator’s network of airports nationwide.