Wednesday, January 07, 2009

Labu LCCT: Another Magic Pumpkin?

Decision for new LCCT completely off the mark

By Frequent Flyer 2 (from e-mail)
Jan 6, 2009


There has been a 'cabinet decision' to approve a new Low Cost Carrier Terminal near Labu. Reportedly this terminal is to be built by Sime Darby and AirAsia, two entities which are not only struggling to run their own businesses but also know next to nothing about building, maintaining and operating airports.

In contrast, the current LCCT operator, which is 50km away from Labu, Malaysia Airports has been winning global Best Airport awards for years in running now and also manages to run a profitable and shareholder value building business despite government controls on the rates it can charge, which are among, if not, the cheapest in the world.

The decision to build a new LCCT at Labu is so wrong on so many counts that it bewilders one's mind as to how the government ministers arrive at such a decision in such haste. Is there no real concern and care for the nation at all? The involved stakeholders have made statements supporting the construction of this new LCCT which will cost RM1.6 billion.

I will now outline why the new LCCT decision is completely off the mark.

1. The Negeri Sembilan MB said that the new LCCT will catalyse the development of the eastern part of the state – but there is no need for an expensive airport to catalyse development as Negeri Sembilan is so small that describing part of it as 'eastern' is laughable.

The current LCCT is only 50km from state capital of Seremban and perhaps equidistant to Labu as well. So the proposed new airport will be only 50km away from current airport. What logic is there here? Let us not forget history. Negeri Sembilan was once part of Selangor and carved out as a separate state due to local chieftains' constant warring.

Fantasyland?

This small geographical appendage called Negeri Sembilan does not need an airport. It already has two airports within 50km distance (LCCT and KLIA). Had the cabinet approved a RM1.6 billion upgrade of the tourist town Port Dickson, I would applaud the move but not another LCCT.

2. The MB mentioned that AirAsia had to move as it desperately requires a bigger LCCT, more state- of-the-art facilities and aerobridges – but this cannot be further from truth. AirAsia, does not want state of-the-art facilities.

It definitely does not want aerobridges. When Malaysia Airports recommended that AirAsia use the facilities at KLIA, which is voted every year by international bodies as being among the best in the world, AirAsia refused. AirAsia wanted a cheap and low-tech facility and that is why Malaysia Airports built the LCCT.

Labu Airport: "AirAsia, does not want state of-the-art facilities."

If now AirAsia suddenly wants all those facilities which are not available at the current LCCT, it is most welcome to use KLIA - not go build another airport.

3. The minister of transport said that there is no question of redundancy – but this is again highly debatable. AirAsia's refusal to use KLIA citing expense and slow plane turnaround forced Malaysia Airports to build the present LCCT.

That made KLIA quite redundant as at present, about 10 million passengers are being channeled through LCCT while KLIA is underutilised. We have a RM10 billion airport (KLIA) which has to 'give away' 10 million passengers to a new airport 20km away for nebulous reasons. Why nebulous?

Because KLIA charges are already about the cheapest in the entire world, even when compared to some of the African airports. KLIA's aerobridge charges are so cheap that when foreign airlines find out, they do a double take and ask whether the number quoted to them is in US$ or RM and when told it is in RM, they shake they heads in wonder as to how it can be that cheap.

Conniving villain?

AirAsia does not want to use KLIA and AirAsia did not want to use the aerobridges for two reasons. The first, is it believed, is that they caused slow plane turnaround times despite the fact that not using aerobridges inconveniences the passengers. But MAS, which uses aerobridges, is able to turn a plane around in 25 minutes, similar to AirAsia.

The second reason is that AirAsia does not want to pay for the aerobridge fee, which at RM65 per docking or only 50 sen per passenger for a typical Boeing 737 load. So to save 50 sen, passengers have to brave the scorching sun and torrential rain to board AirAsia planes at LCCT instead of the comfort of the air-conditioned aerobridges at KLIA.

Remember the furor regarding handicapped passenger? That would have never been an issue had AirAsia chosen the aerobridges at KLIA instead of saving 50 sen per passenger.

4. AirAsia says it can give better deal with their own airport – this is highly questionable. If AirAsia thinks the current fees at the present LCCT, which was built at the cost of RM300 million, are too high, how can it afford to give better deal at a completely new airport which costs RM1.6 billion to build?

What will happen when MAS succeeds in its aim to be 5-Star Value Airline? MAS will be using KLIA and the passenger flow will be shared, enabling neither airport to bring in reasonable returns.

5. AirAsia says Malaysia Airports (MAHB) is charging too much, MAHB is charging RM6 per passenger on a local flight, only one way, not two ways. This charge is mandated by the government, not MAHB. Can we digest the significance of this? You, as a passenger at the LCCT, will have to pay RM6 to use the airport.

That is about what you will pay for parking your car for two hours in the city or even less for a meal at McDonalds. For international passengers, MAHB is mandated by the government to charge RM25 per passenger, again one way only, not two ways.

In comparison, AirAsia pays RM50 to Singapore and RM75 to Bangkok airports. How can the LCCT charges be 'too much'? KLIA is capable to handle up to 100 million passengers based on its development plan. We (the people of Malaysia) have already invested RM10 billion into this KLIA facility.

It is most sensible to use KLIA to the maximum and not throw more money around. Furthermore, we have again invested RM300 million in the present LCCT, which can handle up to 15 million passengers though it is only handling 10 million passengers right now.

--------------------------------

We, in times of economic insecurity, cannot afford to waste existing facilities by allowing new ones to be built especially when the current facilities are the envy of people around of the world in terms of operating and financial performance.

KLIA and the present LCCT are jewels in the crown for Malaysia . They are owned by the people of Malaysia (via Khazanah Nasional) and operated to world class standards by Malaysians. To prove it, I welcome your readers to investigate what sort of awards MAHB has been winning over the years and how it has performed financially despite the constraints placed upon it. A quick read of its annual report would suffice.

On the other hand, AirAsia is struggling to find financing for the airplanes it has ordered and recently announced a financial loss for the third quarter. Up to recently, it owed MAHB money. Sime Darby is also struggling to see the benefits of its synergies arising from its merger with Guthrie and Golden Hope.

Both companies should focus on their core business activities and make them better and not try to shore up their performances by coveting the crown jewels of the nation eg LCCT or the IJN.

The government must focus on catalysing economic growth in the right location and segments and not allow actions detrimental to citizens by allowing irrelevant development that damages past investments.

The justifications given for the new LCCT at Labu is all rhetoric and is relatively free of factual analysis. Please stop this nonsense

Note: How is the financial health of Scomi? 3rd quarter 2008 down to RM19.3 million from 3rd quarter 2007 of RM31.8 millon. Profit for period 2008 RM25.0 million, downfrom RM41.4 million. Without a construction arm in Sime Darby, the RM1.6 billion contract facing up to an "economic depression" could come in handy. A "midnight regulation"?

13 comments:

Anonymous said...

Voice,
Have you ever fly from KLIA LCCT? Have you ever hop onto an express bus from Pudu Raya terminal in this millenium? Both are overcrowded and filthy. Both run by mediocore GLCs (the former run by MAB and the later run by UDA). When Sime announced they are building new LCCT terminal, only then MAB was rudely awaken from their slumber. Quickly they came out with CAPEX to built rival terminal. Aku dok dengar MAB nak buat replacement LCCT terminal dari tahun 2005 lagi....tapi tak bergerak pun.

Din Punggok
Tanah Liat

ahlang said...

salam
biar la n9 ado airport..
ado kerajaan mintak duit kt ko tok buat airport?

apo la nak jadik la ekau nie?
mcm bagus..

ko nie 'jobo' tau tak?
gi tanyo owang.. jobo tuh apo??

-ahlang-
salam setiakawan

Mr. Padedoh said...

Voicey,

You may have bitten more than you can chew here.

On point 1, which MB does not want development? Small appendage or not.

On point 2, you have a point. Too much conning by the same MB

On point 3, whats the landing charge? Stop fooling people with aerobridge charge only!

On point 4, please read my analysis on Air Asia. ( http://padedoh.wordpress.com/2009/01/08/buy-air-asia/)
I actually wanted to kutuk them, but ended up thinking Tony as a damn good CEO.
Once again, how much does it cost to land a 737 in KLIA. If they can land in their own airport why not.

Where was MAS before Air Asia - right up Tajuddins rear. Air Asia came and showed it was profitable to fly domestic, as we all heard that MAS said it was for national service. Sheeez

When MAS becomes a 5 star airline. Geezzz, why not when MAS gets bailed out again.

5. You miss the landing charges mate, once again.

I think its damn good. MAB gets a free ride making tons of money without having to invest in setting up KLIA. It was done using taxpayer money, and MAB makes a ton just operating it, and thank goodness Air Asia is building their own.

Ishak said...

is it not obvious?

Md. Ali Ketapang said...

Salam tuan,

Who are to be blamed? We have a Malay PM, most of the cabinet ministers and MB are also Malay and islam 'is said' the religion of the federation. So is it safe for me to say that all this while the so called Malay leaders who are also Muslim cannot be trusted because they don't practise what they preach. We always hear politicians say 'kita sanggup melakukan apa saja demi kemajuan rakyat bla bla bla .... I'm hearing this every night at KT now. We can avoid all those stupid decisions from being repeated in future. Change the entire leaders. Lets begin with PRK KT.

A Voice said...

Din Punggok

If poor service is the issue, do you spend RM1.6 billion?

Ahlang

Buklan duit kerajaan tetapi kalau fail, kerajaan kena bail.

Duit bukan duit Sime Darby atau Airasia, tapi duit Bank, duit EPF (anda punya) dll.

Mr Padedoh

Will read yr article when free.

That article was written by someone in the aviation industry and not me. They have locus standi.

Tony is no good guy, He is as snaky as any corporate man.

Perhaps you care to explore abt how the arline rationalisation plan was hijacked and change right under idiot PM Tidor's eyes.

The whole plan was changed over the weekend after the plan was endorsed by cabinet and when it was announced, a different one was considered.

Speak to any Cabinet member. AS long it is not Chan Kong Choy or MCA crony.

How could a private entity be given priority over a national airline with Government invesdtment and it serve some national agenda and NEP?

Khairy's and Zaki Zahid's hand is lined with the "murder" and livelihood of MAS staff. This has been written in the blog long ago. Play by play on how it happen just to perpetaute Air Asia.

Air Asia is in a financial mess and like Scomi will go under. It is just riding the PE Pyramid. (Big but hollow an empty inside. Can put corpses).

I guess if you don't know, you don't know. Caveat emptor. So don't put up a rebuttal asking proof and all that shit, I won't allow publication of cheap rhetorics.

Zachary said...

1. I have to agree that we do not need a new LCCT in Labu.

2. The current KLIA is underutlised. If AirAsia said it reaches its max capacity, then get Air Asia X to use KLIA, anyway they are international flights

3. Why on earth we need two separated airports? It looks stupid on the eyes of foreigners.

4. It is a private initiative and funded project. It will benefit Sime Darby,Air Asia and many more in the line. It is a mega project. If it failed, then government needs to step in to bail as they are public company and who owns them? EPF, PNB, Khazanah and etc.

5. A lot can be done with current LCCT and KLIA. We can save RM1.6 billion by concentrating on improvement of existing airports.

6. Bottom line, the proposal is only benefits few parties and not public in general. Why Tony and the gang are pushing hard for this? He wanted to show to MAS that he is the no. 1. But he forgot how much government has helped him in the policy, licensing and etc. But now AirAsia starts to realise about their financial constraints, more losses on the way. MAS has done it and they know the real problem. We shall wait and see what Tony will do for this.

Anonymous said...

Zachary,

Agree we will look stupid to foreigners. Nothing new!.

Well Air Asia said London have 5 airports why not KL?

Don't talk about differnet in size between the two cities.

London have one mass rapid transit system the tube. KL have 3 - Putra, Monorail and STAR.

Well Putra & STAR is now under govt aka Rapid KL.

Time will be that Air Asia will be under the govt and so will KLIA east.

-boleh beLAH-

Mr. Padedoh said...

Hi Voicey,

Let me just point out the last part
How could a private entity be given priority over a national airline with Government invesdtment and it serve some national agenda and NEP?

The only entity worth saving is Air Asia. We should own 30%. Lets say that stake is worth RM 100 m right now, soon it will be worth RM 1 b because Air Asia is run well.

How much has the Government Burnt trying to prop up a company calling itself MAS. So on a return on investment basis , the MAS investment is dead negative!

Why is it that we are so stupid. As long as we invest in the right companies, and ditch the stupid companies, we will do well. Tapi ni sebaliknya, save stupid companies, and dilute your stake in a smart company.

Think like a businessman, not like an agenda man!

A Voice said...

Mr. Padedoh

I know how to think like a businessmen. And I know what is in the mind of a corporate player like Kamaruddin Meranun. Tony is just the face to auta.

Why should I think like a businessmen?

Lets refresh a mxim in Financial Theory's: Corporation objective is maximise shareholders value. That would to max. dividends (ie profit), and shares value (ie tangible and non tangible asset value). It could really be done or a perception of being done.

It does not say anything about community, nation building, consumers needs and rights (remember the Airasia and OKU issue), business ethics, CSR, etc.

Show me an honest businessmen, I can show you a thousand and maybe 10,000 crooked ones. By not thinking like a businessmen, the probability is I am not in company of crooks.

Without reservation, there are devious and evil characters in Airasia and linked to Airasia. THEY DO NOT SERVE THE NATION'S INTEREST BUT MERELY THEIR GREED!!!

About you asking, "why are we so stupid", please leave me out of from that "we" claim.

On your argument of dumping a losing concern, you can do better than that. I am lazy to regurgutate the same ole shit. Scan my blog in 2007. I've written a lot on Air Asia. You should read a comment by Aerospace Analyst in C-Bok's blog here. It would shred your arguments to pieces. The commentator was defending my position.

Don't you guys have a justified argument than overselling the over rated auta Airasia? Its going down man. Its aircraft is due for a major C check. It can't raised money to pay for the A3230 and not nak buat RM1.3 billion airport with an exchange of 3,000 acre land.

If only you know, you wouldn't have riden Airasia. Imagine, 3 casualities in KK in 2007 alone. Its just better than ole China's CAAC.

I have seen many Pan-Els, Grand United, Emporium Holdings and now Airasia. It is definately another corporate con job and waiting to go under.

It is riding on a hollow PE pyramid and waiting time to crumble. It is not if it will crumble but a matter of time. The airport is a just to delay.

As businessman, you shd remember every entry must have an exit. Don't be the one to carry the baby. Remember I said it on 11/1/2009. Do not wait till I tell you so later.

Anonymous said...

If AirAsia is so interested inthe domestic routes why must it give up the Sabah-Sarawak sector after operating it for only one year and being subsidised for it? Because of its shenanigans at least 10 capable captions of the Fokker Friendship lost their jobs and are now in Kazakhstan and other countries. Yet we are said to be short of Fokker pilots. So what's the drift?
The new LCCT in Labu is a waste of the country's limited resources which could be employed elsewhere and especially during current economic slowdown.
What is their rationale for it if not to spite Tun Dr Mahathir for building the KLIA which was planned to cater for KL's airport needs for another 20 years.
Looks as if this guy Tony Fernandez is riding high what with support from Khairy and Kallimullah. But behind all the facade of success some rot is already setting in.
Last I heard both Tony and Kalli have already gone to Mas asking it to come to Air Asia's rescue.
Another question I would like to pose: why must the governmet gurantee Air Asia's forays into ordering so many Air Busses?
Why must the taxpayer bear the brunt of Air Asia's excesses?

Anonymous said...

Thank you for your write up...

Tahniah...anda memberi ulasan berdasarkan fakta dan smaklumat....namun sedihnya yang pengunjumg yang lsain memberi feedback berdasarkan emotional dan fikiran tanpa ilmu...

Contoh komen tanpa fakta tapi cuma ikut perasaan dan tiada nilai ilmu pengetahuan:
"salam
biar la n9 ado airport..
ado kerajaan mintak duit kt ko tok buat airport?

apo la nak jadik la ekau nie?
mcm bagus..

ko nie 'jobo' tau tak?
gi tanyo owang.. jobo tuh apo??

-ahlang-
salam setiakawan


Sekali lagi tahniah kerana mampu memberi fakta yang tepat dan penyelidikan yang ssrapi....

Rakyat mudah terdaya dengan kata-kata dan perasaan shingga buta kepada fakta.

Sekarang saya sedar...AirAsia menipu penumpang...dalam ticket charge airport tax...tapi duit tu tak bagi pun kat MAB.....Malunya Airasia....guna duit tax penumpangs sebgai sumber cash flow...

No wonder la dulu tak sabar-sabar nak ambil operasi MAS di pendalamans Sabah dan Sersawak...kononnya boleh lebih cekap dan boleh buat untung lebih berbanding MAS....rupa-rupanya BOLEH BLAH....bukan setakat tak boleh uruskan penerbangan disana tetapi tak tau baiki kapal terbang pun.....Bila dah tak boleh handle dengan muka tak malu boleh pula...menangis kat kerajaan paksa MAS ambik balik.....Macam ni budak habis SPM pun boleh untung...Business tak laku bagi balik suruh org lain ambik...kemudian hutang tak mau bayar.....

Tunggulah nasib sebenar Airasia bila tak ada BAPA nak lindung dia......

MAB sbelong to rakyat....MAS sbelong to rakyat....sAirasia belong to crony.....tapi seperti biasa rakyat akan benci Organisasi milik rakyat sebab diuruskan oleh Bumiputra.....Let said Proton,MAS & MAB belong to non-Bumi....will others condemm?

Anonymous said...

To facilitate AirAsia’s move from Subang Airport to KLIA in 2002, AirAsia was given a waiver of all aeronautical charges (excluding Passenger Service Charge (PSC)) paid by AirAsia for their flights over and above what the airline was paying at Subang Airport. This waiver was for a period of five years (2002-2007) and was applicable not only at KLIA but also at all other airports in Malaysia that AirAsia may operate to. This waiver was for both domestic and international flights, which includes landing, parking, aerobridge and check-in counter charges. AirAsia also enjoyed special rental rates for office space at all airports.

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