Creating the world’s first REIT for airports

PETALING JAYA: The government has proposed to set up the world’s first airport real estate investment trust (REIT) to raise RM4bil to fund future airport upgrades and expansion.

The idea of setting up an airport REIT is to move the aviation industry towards a self-sustainable model that does not have to depend on the government’s expenditure for future upgrades and expansion.

As it is, the government owns all the physical assets of airports in the country, while Malaysia Airports Holdings Bhd (MAHB) is the concessionaire that operates and manages the airports till 2035.

Finance Minister Lim Guan Eng said during his Budget 2019 speech that investors in the airport REIT would get income from user fees collected from MAHB.

It hopes to sell the REITs to private investing institutions and this will only be carried out after the new regulated asset base and user fees structure are negotiated and finalised.

“The move sees the aviation industry moving towards a user funding model as opposed to using the government’s development expenditure for airports.

“Currently, the government takes money from the federal pool to fund airport expansion and upgrade, but the shift to ride on the user funding model is in line with what some countries are doing globally,” Maybank Investment Bank senior analyst Mohshin Aziz said.

MAHB in a statement said that the formation of the Airport REIT was a way for the government to securitise its infrastructure assets.

Malaysia Airlines Bhd CEO Izham Ismail says any funds generated and channelled back for the development of the aviation industry in general would only be positive for the sector.

Apart from that, Lim said the government would impose a levy for all passengers travelling overseas via air routes starting June 1, 2019 - RM20 for passengers travelling to Asean countries and RM40 for other countries.

This will raise the overall cost of travel for air passengers, as the current passenger service charge for Asean is RM35 and international, RM73, and with the hike, travellers will have to pay RM55 and RM113, respectively. The domestic travel levy still remains at RM11.

“We are worried about the impact of raising the departure levy and it is a sharp rise for international travel. Moreover, the processing fees for visas is said to be among the highest in the region and that makes Malaysia an expensive tourist destination,” says an industry executive.

Lim also added that Khazanah Nasional Bhd would lead and develop an 80-acre development in Subang as a world-class aerospace industry hub.

Khazanah will also work with all relevant agencies, especially Mara, to produce high-skilled workers to meet the demands of the industry.