MOT: Govt to set up Airport Development Fund (ADF) to help finance airport developments

9 February 2023

The Ministry of Transport said the government intends to set up an Airport Development Fund (ADF) to help finance airport developments.

The ADF will be partly funded by airport taxes — the passenger service charge or PSC that is paid by departing passengers.

Transport Minister Anthony Loke told the media on Thursday that 50% of the PSC component that is taken into account in the calculation of the user fee that Malaysia Airports Holdings Bhd (MAHB) pays to the government to operate the airports will be channelled into the ADF trust account.

“The percentage of PSC or percentage of other components in the user fee to be contributed to the ADF account will be reviewed every three years,” said Loke.

He added that the materials terms of the two operating agreements (OAs) between the government and MAHB — one for the operation, management, maintenance and development of Kuala Lumpur International Airport KLIA1 and klia2, and another on the same for the other 37 airports and airfields (short take-off and landing airports (Stolports)) in the country until 2069 — have received in-principle approval from the Cabinet.

The OAs (OA 2023), which are being finalised, are expected to be signed by next month.

With the agreements, MAHB is expected to have greater flexibility in the method of funding airport development costs, using either government allocations via funds channeled through Development expenditure (DE), or MAHB’s own funds, through an identified investment recovery model mechanism.

“MAHB will have options to cooperate with any private parties via joint ventures. Lately, there have been great suggestions to develop major airports in the country. Many private parties have expressed interest in developing the airports and MOT encourages that,”said Loke.

He added that any project will only be implemented on the agreement of the mutual parties and is subject to government’s approval once the weighted average cost of capital (WACC) is determined.

He said the new material terms under the OA 2023 will enable the government and MAHB to implement a more competitive commercial development plan that has the potential to enhance the government’s income through revenue sharing derived from government-owned land that is developed by MAHB.

“MAHB will continue to be tasked with all aspects of the management and maintenance of the 17 Stolports, which are a social responsibility of the government.

“The implementation of OA 2023 will also allow MAHB to prepare a better long-term development plan for all the airports under its purview, taking into consideration MAHB’s expertise and experience in airport management whose performance and achievements have been commendable in Malaysia and abroad,” said Loke.

He further said the Cabinet has also agreed to the proposal to rebrand KLIA and klia2 to KLIA Terminal 1 and KLIA Terminal 2 to improve their marketability, value and effectiveness, in addition to strengthening their competition with other international airports in the region.

“The proposal to sign the OA 2023 between the government and MAHB, as well as the proposal to rebrand KLIA and klia2 are important for the commercial sustainability of KLIA and also the growth of (all other) airports throughout the country,” said Loke.

In a separate statement, MAHB managing director Datuk Iskandar Mizal Mahmood said the OA 2023 will give the airport operator the flexibility to invest and reinvest in the modernisation and development of viable airports under fair and conducive commercial terms, with a clear investment return mechanism.

“The new OA 2023 is a reflection of the government’s confidence in Malaysia Airports’ capabilities and deep experience in managing and operating airports locally and internationally.

Iskandar added MAHB will be able to continue to operate in underserved essential community airports and STOLports, and enhance airport capacity where needed, as well as to provide better airport service levels as a whole.

MAHB obtained the in-principle approval from the Cabinet on the material terms of the OA 2023 on Feb 2.

Source: www.theedgemarkets.com

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