Clear air but turbulent weather

  • Business
  • Saturday, 25 Jan 2003


LAST week, Malaysia Airports Holding Bhd revealed that passenger numbers in Kuala Lumpur International Airport grew by 12.3 per cent. Quite an “outstanding achievement” on the back of challenging times in the aviation industry.  

Passenger movements for KLIA from January to December 2002 totalled 16.3 million in 2002, up from 14.5 million in 2001. 

Upon closer examination, however, the picture gets clearer and the growth, less outstanding. While the passenger movement numbers in 2001 treat both KLIA and Subang separately, the figures released for 2002 include movements at both KLIA and those contributed by the migration of all flights from Subang to KLIA in July 2002. 

So, if one were to compare the combined passenger numbers over the period, it would indicate a smaller growth of just over 5 per cent (17.4 million passengers in 2002 versus 16.5 million in 2001).  

Even if on a positive note it means KLIA has benefited from the migration of Subang flights, it also indicates that its passenger numbers last year was largely aided by the migration of flights from Subang. In 2001, passenger movements at Subang Airport totalled 1.9 million. In fact, had low cost carrier Air Asia (which carried over 1 million passengers in 2002) not begun operations, the passenger numbers could have remained stagnant or perhaps even dipped. 

Despite an array of attractive deals such as free landing and parking, KLIA is just not landing the big airlines. Why? 

Airlines contacted by BizWeek were frank in their assessment of the situation at KLIA and provided some insight into the possible fortunes of this airport. It is far from rosy. To be fair, many of the factors, influenced by global economics and the airline industry, are not within the control of MAHB.  

First, they say, the free landing and parking offered by KLIA would play a very small part – if at all - in their decision whether or not to serve a market. 

A major European airline says the offer by KLIA was “not very relevant” as such charges were a “small proportion of our costs, unlikely to influence our decision.” 

All Nippon Airways says the landing and parking charges here are not a significant factor “compared with what we pay in Japan”. 

What matters for these foreign airlines is yields or volume – ideally both – and an operation into KLIA, they say, is not appealing in this regard.  

“The problem here is yields – they do not support an operational environment,” says Lufthansa country manager for Malaysia Christopher Chang. “We certainly do not have the yields to command an online presence.” 

Chang could well have been speaking for all the major airlines that have suspended flights over the past few years. 

All Nippon Airways’ head in Malaysia Richard Ho says there just wasn’t enough business to justify his airline flying into the airport. “We were flying empty 777s out,” he says. 

Stephen Thompson, regional general manager for British Airways/Qantas says BA’s departure from KLIA in 2001 was “as a result of commercial reasons”. 

The lack of connectivity is a major issue too for many airlines.  

“In the current environment we have to adjust capacity to meet demand,” Thomson says, explaining that demand is much better served by consolidating operations in Singapore. 

In fact, many airlines say that for KLIA to achieve its stated objective of being a “regional hub”, it would need to compete more effectively with Singapore and win airlines at the expense of highly successful Changi.  

This KLIA tried to do. Last year, KLIA initiated talks with British Airways, Qantas and Lufthansa to try to win these airlines back. All three airlines said they were staying put in Singapore. 

“You have two massive airports within an hour’s flying of each other and a relatively limited home market,” says one airline spokesman, “someone’s bound to lose out.” 

Malaysia Airlines’ stronger financial position and Air Asia’s new growth should be good for the airport but it may not be enough. 

One factor moving against KLIA is the current trend of airlines joining global alliances such as Star Alliance, Oneworld and SkyTeam. Malaysia Airlines is currently not a member of any alliance and this could limit the size of passenger and cargo traffic that move through KLIA.  

Joining an alliance gives an airline access to new markets but it also allows airlines to co-operate in marginal markets and cut out unnecessary duplication in service through so-called “code-shares”. With uncertain economic skies and a global airline industry in turmoil, airlines have been more willing to cut out loss making routes.  

An industry analyst says that these alliances have resulted in major airlines consolidating their long haul operations in key hubs while local alliance partners carry their passengers on to regional destinations via these hubs. 

KLIA is a good example of these alliances in action. The departure boards display logos and flight numbers of airlines such as American, Northwest and Lufthansa. But the American flight is strangely bound for Tokyo, Northwest is headed for Amsterdam and Germany’s Lufthansa ends in Bangkok. The fact is it is all a bit of illusion - their planes never touch down at KLIA. 

“These airlines place their codes on alliance partner flights and channel passengers through their partner’s hubs like Singapore, Bangkok, Hong Kong or Tokyo,” says the industry analyst. “That’s the way of the future.” 

It is no wonder then that the only major airlines increasing frequencies to KLIA have been those with successful hubs of their own in the region.  

In the end, KLIA seems to be caught in a catch-22 situation. It needs more flights and airlines for connectivity, and airlines will not come in because there is not enough connectivity.  

Although none of the major carriers say that they would definitely not return to the airport, no one gave firm commitments to fly in either. 

BA/Qantas’ Thompson says both airlines will “continue to monitor the situation at KLIA”. He nevertheless stresses that KLIA needs to establish a close dialogue with the airlines, and adjust to market conditions and the needs of the airlines. 

All Nippon Airways says coming back to KLIA is “always a possibility” but the airline is now concentrating on lucrative markets like China.  

With uncertain economic and geopolitical skies impacting both business and tourism, and with continuing and new competition from airports in the region all wanting to be hubs, the outlook for KLIA looks challenging. Coupled with that, the airport is beset with other woes too, including well reported cases of security breaches, baggage pilferage and delivery and other inefficiencies. 

A major airline, which is part of a global alliance, says: “The infrastructure at KLIA seems perfect but that’s not the reason why we serve an airport.” 

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