75% of airports in Malaysia not commercially viable

KUALA LUMPUR: More than 75 per cent of airports in Malaysia are not commercially viable and are managed on a cross-subsidisation model to provide the Malaysian people with the required connectivity among its smaller towns and rural outposts.

Malaysia Airports Holdings Bhd (MAHB), which manages a network of 39 airports - five international airports, 16 domestic airports and 18 short-takeoff and landing (STOL) ports in Malaysia, said maintaining this network of airports involved a huge outlay of both capital and operational expenses.

The airport operator said, in a statement, that it has been supporting the growth of airlines operating in Malaysia throughout the years with its low charges and incentive programmes.  “In the case of low-cost airlines operating at our airports, over the last ten years this had amounted to more than RM1.5 billion market advantage through differentiated charges excluding the incentives,” it said in response to an article published in a local daily last week.

The article, among others, said the absolute lack of competition meant that passenger service charge (PSC) can be imposed on passengers, as well as, any landing, parking fees and ancillary charges can be imposed on airlines.

MAHB, said the article was incorrect as airport charges were regulated by the government and airport operations and management in Malaysia was done in a highly regulated environment.

Prior to the formation of the Malaysian Aviation Commission (MAVCOM), this decision was under the purview of the Ministry of Transport (MOT) Malaysia.
It was made known by MAVCOM that in determining the charges, the commission had engaged a world-renowned consultant to perform a detailed independent research and gone through a comprehensive user consultation process.

“It is inaccurate to insinuate that Malaysia Airports can charge whatever price it likes because it is a monopoly. We are governed by the operating agreements we have with the Malaysian government which has a stringent mechanism for revision of charges.

“It is also part of the operating agreements that these charges must be below regional levels. Malaysia Airports is not able to introduce any ancillary charges unless decided by the government and by this argument, cannot be considered a monopoly,” it added.  MAHB also reiterated that charges at both terminals in KLIA were the lowest in the region for domestic PSC and average international PSC.

Its landing and parking charges are also the lowest in the world among similar-sized airports.

“Annual authoritative study by LeighFisher, covering North America, Europe and Asia, found that Malaysia's charges are only one-third of the world's average for aeronautical revenue per aircraft movement (ATM), as well as for aeronautical revenue per passenger.

“The study had also shown that it was the lowest among the 50 airport operator group of companies benchmarked in the study,” it said.
MAHB also noted that the comparison made by the article between KLIA's ranking in Skytrax against Singapore's Changi International Airport (Changi) cannot be deemed as an ‘apple to apple' comparison.

“Changi subscribes to the International Civil Aviation Organisation (ICAO) principle of non-discriminatory airport charges, i.e. the same airport charges apply to all airlines.   “Changi's charges are higher and more varied than KLIA's in that they include additional items such as airport levy and airport development fee which are used to pay for its airport development cost, on top of the PSC, said MAHB.

The airport operator also said it was worth noting that 70 per cent of the international passenger traffic for Malaysia comprised foreigners who  enjoyed the lower PSC when they travel to Malaysia.

On the contrary, Malaysians and other nationalities who travel to or from other countries pay a much higher PSC at other foreign airports which have contributed to the development and betterment of those airports such as Changi.   

“The higher aeronautical revenue enjoyed by Changi may have allowed for more superior facilities leading to the retention of its position in Skytrax's ranking,” it said, adding that, if Malaysia was to compete against Changi's ranking, it may be in the nation's interest to consider emulating their charging model.  Nevertheless, MAHB said, Skytrax is not the only global airport benchmark being used by airports worldwide.

An important one used by airports worldwide is the global Airport Service Quality (ASQ) by Airports Council International (ACI) where KLIA had ranked 12th  in the world in 2017 for airports handling more than 40 million passengers per annum, surpassing other major airports such as Dubai which was ranked 20th and Amsterdam Schiphol which was ranked 26th. - Bernama
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