MAHB plans to hive off foreign ops


  • Corporate News
  • Saturday, 06 Jan 2018

Badlisham: We are open to having strategic partners in the international unit.

APART from pushing for higher passenger traffic, upgrading and improving its services this year to boost income, Malaysia Airports Holdings Bhd (MAHB) is also keen to sell stakes in its international units.

It plans to set up a separate unit for its international businesses, to be known as Malaysia Airports International Sdn Bhd (MAISB) by the fourth quarter of this year.

Currently, its foreign businesses are parked under MAHB, but a separation between domestic and foreign operations will give it greater transparency and is in line with what the market wants. The unit for services and consulting may eventually have some strategic investors.

“We are open to having strategic partners in the international unit,’’ MAHB managing director Datuk Badlisham Ghazali (pic) said after his briefing on the outlook of the airport operator yesterday.

The new unit will house its Turkish operations, held via Istanbul Sabiha Gocken International Airport (ISG) in which it has 100% equity stake, Rajiv Gandhi International Airport Hyderabad (11%), and an operational contract with Hamad International Airport Doha. MAHB years ago paid a total of 528.9 million euros for ISG.

MAHB is also keen to see its stake in ISG reduced and is in talks with about ten strategic investors. Badlisham says there have been many interested parties as this is a “quality asset,’’ and “quality assets are rare.’’

ISG is one of the two international airports serving Istanbul, the other being Ataturk Airport. With Ataturk getting congested, many more airlines now fly into ISG.

However, ISG remains loss-making. It reported a pre-tax loss of RM47.3mil for the third quarter of 2017.

But Badlisham remains confident that ISG will turn the corner by this year and become profitable as the passenger traffic numbers are growing. “Furthermore, MAHB is an international company with established reputation on the business side, so people are comfortable doing business with us. But our intention is to maintain a majority stake in the shorter term. But we can’t say (what it would be) in the longer term. Anything is possible,’’ Badlisham says.

Turning to domestic operations, he says MAHB ended 2017 on a high note, recording 8.5% passenger traffic growth over 2016, with 96.5 million passengers passing through its gates across the country. This was supported by international traffic growth of 14% and domestic at 6.5%.

But for 2018, the projections were lower at 6.3% despite four new airlines were confirmed flying into KLIA and a dozen airlines increasing their frequencies and opening of new destinations.

He reckons international passenger growth will be about 8.3% and domestic 4.3%, lower than the 2017 figures. China and the Indian subcontinent would continue to form a significant portion of international arrivals into Malaysia.

“The slower growth is mainly domestic, but that may change,’’ he adds.

Across the region, about 800 new seats will be added into the system and competition in the region remains intense. However, the local carriers, be it AirAsia, Malindo Air and Malaysia Airlines Bhd, are adding more seats and working towards flying more passengers this year. Experts say there will be growth in the region but KLIA has to compete with Singapore’s Changi and Thailand’s Suvarnabhumi airports for traffic, especially transit.

MAHB has set aside funds to work with the tourism authorities to further promote Malaysia as a choice destination.

But the equalisation of the passenger service charge (PSC) between KLIA and klia2 is seen as dampener by some parties as travellers to international destination out of klia2 will have to pay RM23 more.

The equalisation of PSC at KLIA and klia2 for international destinations was supposed to take off on January 1, but according to some airlines, it has been deferred to Feb 1. AirAsia has furiously voiced its dissatisfaction over the potential hike as the low cost airline feels it will affect its business. The plan is to have one rate at RM73 for international travel from RM50 at klia2 now.

But to Badlisham, the equalisation of the PSC has not really affected demand for travel.

“We understand there is always sensitivity in this because no one wants to pay extra especially for domestic travel and that is why it is kept low. But the choice is really yours (to travel international),’’ Badlisham says. He adds that “our pricing regime is the lowest in the region.’’

But for travellers, there is really no other option other than flying out of KLIA or klia2 if they want to go overseas and will be subject to higher PSC if the equalisation is implemented on February 1. The only other option is to fly via Singapore. He wants to boost earnings but did not give any earnings forecast. For the first nine months of 2017, the company reported RM208.63mil in profit on the back of RM3.4bil revenue. Its shares rose 2 sen to close at RM8.80 a share yesterday.

Upgrades and expansion

MAHB will be kept busy this year as it intends to spend more to upgrade, maintain, refurbish and automate its systems so that it can provide better levels of services to travellers who use its airports. It has projected an annual 30% increase in capital expenditure for the next three years. Without disclosing figures, Badlishams says it will be part of its operational expenditure.

All these upgrades are part of growth but also there has been numerous complaints over its services, be it from cleanliness of its toilets to long queues, unfriendly staff, delayed baggage and its aerotrain service at KLIA that broke down three times last year.

For klia2, which maintains is not a low-cost carrier terminal, a traveller begins his journey with an endless walk to the gates.

Without disclosing any absolute figures, he said an amount will be used to upgrade and maintain at least ten airports including KLIA.

But by the middle of last year, MAHB guided analysts saying that capital expenditure figures of RM1.5bil to RM2.5bil was needed to increase the capacity at KLIA main terminal building to 40-45 million passengers per annum from 30 million given the current high utilisation rate of over 90%.

For KLIA, he says it will either be an expansion at the contact pier or building a new satellite building, but this decision will be made by the Government.

Apart from cleaner toilets, it wants to increase the number of busses to 20 for feeder services between KLIA and klia2 in view of the breakdowns of the aerotrain and the upgrades the aerotrain will be undertaking.

MAHB is also looking to reduce the long queues, adding more check-in kiosks, and reconfigure the current immigration gates between auto and manual. “We are trying to improve our service levels but there are multiple players at the airport and we normally get (the flak) because we are the biggest player…though it is our responsibility’’ he says.

Recently, the airline’s ranking as world’s best airport dropped ten notches to 34 due to several reasons. The survey was by Skytrax, a London-based research body survey. It is an annual survey based on responses from users. In fact, KLIA’s ranking has been on a downhill roll since it bagged the eighth spot in 2012.

Badlisham wants the ranking to go up as he says “it is our pride.’’ MAHB manages 39 airports in the country and the only one not under its jurisdiction is Senai Airport.

He adds that MAHB would allocate RM52.5mil this year for facilities upgrade and refurbishment of six short take-off and landing airports whereby investments in airports in Sarawak alone amounts to RM42.1mil covering Kuching, Miri, Sibu, Bintulu, Limbang and Mulu.

New projects pending approvals include the building of a new airport at Mukah, expansion of Kota Baru and Sandakan airports, upgrades for Penang and Langkawai, and a study is being done if a new airport is needed for Pulau Tioman.

He adds that plans are also in place to upgrade Subang airport, which is also the city airport and the surrounding areas which is the Subang aero-tech park.

About 46 acres are also earmarked for greenfield development of an industrial park for aerospace high-tech/precision manufacturing and aerospace/logistic operations. MAHB is also developing areas around the airport into an aeropolis. Works on the Digital Free Trade Zone (DFTZ) in which China’s Alibaba is a joint venture partner is expected to begin this year, with completion by the third quarter of 2020.

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