Carved pumpkin (© Michele L / sxc.hu)
LIKE the pumpkin in Cinderella that transforms into a carriage, AirAsia Bhd and Sime Darby Bhd hope something equally fantastic will emerge from the plantation land in Labu, Negeri Sembilan.
The unlikely pairing of the low cost carrier and the plantation conglomerate to build a new low cost carrier terminal (LCCT) has set tongues wagging. Dubbed KLIA East @ Labu, the proposed airport will sit on 2,800ha of Sime Darby plantation land. Costing RM1.6 billion, excluding the cost of land, and land and rail links, the airport is slated to open in March 2011.
Cabinet approved the plan on 5 Jan 2009.
The speed and secrecy with which the project, situated less than 10km away from KLIA, received approval caught both the public and the corporate world by surprise.
To add to the confusion, Malaysian Airports Holdings Berhad (MAHB), which operates all Malaysian airports except Senai, has also submitted a proposal to build a new LCCT. This new terminal will be built next to KLIA’s main terminal, and will be ready a year after KLIA East @ Labu is scheduled to begin operations.
Catering to the crowd
Since word of AirAsia’s plan for a new airport leaked out in December 2008, questions have been raised about the need for such a venture.
That we need a new LCCT is not in doubt. Anyone who has had to endure the crowded and chaotic conditions at the Sepang LCCT would wholeheartedly support the building of a bigger, better terminal.
Tony Fernandes giving a talk at an AirAsia fair (© lastsham / wikipedia.org)
Indeed, if projections are accurate, things will be getting a lot more crowded in the years to come. AirAsia’s chief executive officer Datuk Seri Tony Fernandes told the media on 8 Jan that AirAsia and AirAsia X expect to cater up to 60 million passengers per year by 2013, far outstripping any capacity increase planned by MAHB.
But are the projections accurate? And is an airport in Labu the answer?
AirAsia’s passenger traffic projections, which the low cost airline is using to justify the airport in Labu, may be overly-optimistic, say analysts.
They note that the global trend for passenger travel is slowing. Hence, they question whether AirAsia’s passenger growth forecast is inflated.
Proposed site for Rakyat Terminal (pic source: AirAsia microsite)
According to a 6 Jan 2009 Aseambankers research paper, an analysis of passenger traffic in Malaysia suggests a slowdown in growth from 2008.
Aseambankers analyst Vincent Khoo notes that AirAsia Group regularly forecasts optimistic traffic growth, and the regulatory environment in the aviation industry is indeed rapidly liberalising.
However, he says, “official data suggests relatively sedate passenger traffic growth in recent years”. This trend, he says, will be exacerbated by the worldwide slowdown in air traffic caused by the global downturn.
Ng Sem Guan, an analyst with OSK Research, also points to two other concerns in a 22 Dec 2008 research paper. “Currently, there are no airlines in the world that have their own commercial airport, thus MAHB and other airlines may cite anti-competition clauses on this new proposal.”
Savings and safety?
Ng also questions AirAsia’s repeated assertions that running its own airport would result in lower passenger fares. This is because current budget passengers are already enjoying lower airport charges from MAHB.
“We are doubtful that the quantum of saving (from AirAsia running its own airport) will eventually be passed on to the passengers.
(© Kriss Szkurlatowski / sxc.hu)
“On top of that, the company also currently enjoys various incentives in the form of lower or free landing and parking fees for introducing new routes, thus the new airport may not necessarily result in significantly lower cost,” he adds.
Duplication of services
The International Air Transport Association (IATA) has its reservations, too. In its reply to The Nut Graph, IATA’s corporate communications (Asia Pacific) manager Albert Tjoeng points out that having two airports could result in duplication in services. These include fire and rescue, air traffic control, immigration and customs.
“There are also air traffic management implications. KLIA currently has aircraft arriving from and departing in all directions. Having another airport nearby could impact the efficiency of air traffic management. There could potentially be air traffic delays,” he adds.
Finally, even if the project is being touted as privately-funded, does this really mean public funds won’t be utilised? For example, who will foot the bill for essential airport operations such as Customs, Immigration and Quarantine facility; police security; and air traffic control which comes under the Department of Civil Aviation?
There are also concerns about who will operate and maintain the airport once it is up.
One thing is certain. The Labu airport will certainly undermine efforts to turn KLIA into a major hub to rival Singapore’s Changi. KLIA’s failure to attract more foreign airlines has already resulted in the airport being underused. The situation can only get worse if KLIA East @ Labu becomes a reality.
If AirAsia moves out, MAHB, whose major shareholder is Khazanah Nasional Berhad, would lose its biggest tenant. It is curious why the government would favour a private sector initiative that not only negatively impacts a government-linked company but also contradicts national policy about developing KLIA as a hub.
In AirAsia’s haste to get the project off the ground, too many questions remain unanswered.
In the meantime, the battle for public perception over KLIA East @ Labu is being fought on the internet. From fomer prime minister Tun Dr Mahathir Mohamad to Sime Darby Watch and Rocky’s Bru, there is an active campaign in the blogosphere against the new airport. To counter the negative publicity, AirAsia’s Fernandes has dubbed the project “The Rakyat’s Terminal”. The airline has also launched a microsite to garner public support.
Whatever the outcome of the public perception war, however, the obvious solution is for both disgruntled parties — AirAsia and MAHB — to compromise and hash out an agreement about a new LCCT that would maximise the use of existing resources.
But with work on the new airport already set to start at the end of January 2009, it looks like it may be too late to stop this pumpkin from being carved up.