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.
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.
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.
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"?
Wednesday, January 07, 2009
Decision for new LCCT completely off the mark
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