PETALING JAYA: The proposed Airport Real Estate Investment Trust (REIT), the first of its kind in the world, is expected to generate more than RM700mil per annum.
Announced during Budget 2019 last week, it will see the departure levy on international passengers being introduced from June 1, 2019. The government will sell a stake in its airport asset into a REIT structure and use the proceeds for enhancement capital expenditure (capex).
The departure levy is applicable to every international departure at a rate RM20 for Asean destinations and RM40 for other regions. This would deliver more than RM766mil per annum, said Maybank Investment Bank Research (Maybank IB) in a report.
It said the government also planned to sell a 30% stake of its airport assets via a REIT structure for targeted net proceeds of RM4bil.
“The monies will be used to upgrade existing airports and expand congested ones. The exact structure of the Airport REIT is sketchy for now, but we do not think it will be punitive to MALAYSIA AIRPORTS HOLDINGS BHD (MAHB) due to safeguards from its operating agreement with the government.”
Maybank IB pointed out that the government intended to use the proceeds and upgrade existing airports and expand capacity for congested ones.
“This is a positive way to raise funds without tapping into the federal tax pool. In theory, there are many merits to do this and it will provide the capital market with an income generating infrastructure asset of quality.
“The government, under Budget 2019, stated that it is considering to monetise other assets via the REIT structure such as hospitals and rail infrastructure. Therefore, this Airport REIT is a benchmark for other initiatives.”
The research house, however, said the structure was not without its share of complexities.
“Airports are in constant need of maintenance capex. Furthermore, most airports will reach their design capacity over a 10-year cycle and require major capacity expansion. Malaysia’s REIT structure only allows a 15% provision for expansion, and this might not be sufficient for airports.”
AllianceDBS Research said the planned REIT appeared to be primarily securitising cash flows from user fees, where the existing agreement is MAHB pays a progressively escalating proportion of airports revenues to the government (11.73% in the first half of 2018).
“The absolute amounts were RM392mil and RM362mil in 2016 and 2017 respectively.”
Meanwhile, Maybank IB said the departure levy would be negative for airlines, adding that MAHB would be largely unaffected.
“Historical accounts are mixed regarding the impact of tax hikes on air travel; in Europe, it caused a multi-year traffic decline while in Hong Kong and Singapore, it merely reduced the traffic growth momentum slightly. The jury is not yet out whether the departure levy will kill passenger demand.”