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AirAsia & KLIA East@Labu

07 January, 2009 | Written by Patchay at 6:52 PM in ,

Facts, Figures and News

In the past, the discussion between AirAsia and Malaysia Airports Holdings Bhd (MAHB) for a new, large and permanent Low-Cost Carrier Terminal (LCCT) had broken down not once but several times.

Several sites within KLIA had been selected for the new LCCT but MAHB had told AirAsia of many lame excuses like bad soil condition and 5m high rail tracks that would prevent movement of aircrafts.

Not too long ago, a new permanent LCCT proposed by MAHB to be built within KLIA was described as “too small” and “too late” to keep up with AirAsia’s passenger growth as it will only be completed in 2014.

AirAsia said it could not wait for MAHB to finalise its plans for the setting up of a larger LCCT to replace the over-crowded existing LCCT at KLIA.

Hearing of AirAsia's predicament, Sime Darby took the opportunity to approach AirAsia with the KLIA East @ Labu airport plan, which would complement the conglomerate's multi-billion ringgit development project at Negeri Sembilan Vision City (NSVC).

When Sime Darby announced on Monday that they have received government’s nod for the Labu terminal, MAHB quickly announced that they could also build a new LCCT at a reasonable cost by 2011.

I summarized the Labu airport plans here:

1. The Malaysian Government (Prime Minister, Cabinet, Ministry of Transport and Finance Ministry) has given approval to the construction of a new LCCT to replace the existing one at Kuala Lumpur International Airport (KLIA) in Sepang.

2. The project is known as “KLIA East @ Labu”.

3. The proposed location is Kampung Gadong Jaya, in Labu, Negeri Sembilan. The location is between Bandar Enstek and Bandar Baru Nilai, about 8.6km by road from KLIA Main Terminal.

According to media reports, the location is somewhat nearer to Kuala Lumpur than the present LCCT in Sepang, which is about 20km away from KLIA Main Terminal. And Labu will be 50km from KL’s Golden Triangle compared with 78km from KL to KLIA Main Terminal.

4. The idea to set up a new LCCT in Labu was first mooted by Sime Darby 6 months ago to spur the development of its 5,261-hectare NSVC.

Currently a vast area of plantations, NSVC is part of Sime Darby’s 12,120-hectare Central Vision Valley (the other being Selangor Vision City) property development project spanning Selangor and Negeri Sembilan states, a concept which includes universities, seaside resorts, a techno-park, a wellness city, a medical city, a sports city and a safari park, among others.

Bandar Enstek is a RM9 billion flagship development of TH Properties, owned by Lembaga Tabung Haji Malaysia. The new city will have an education park (including the proposed KL Education City), a medical city, a technology hub, a business park and resort-like residential townships.

5. The cost to construct the new LCCT including terminal and runway is RM1.6 billion, excluding the cost of land and other costs.

6. The development is privately funded by rich conglomerate Sime Darby and AirAsia. A third party option could be decided later. Sime Darby, owner of the land, will also be the developer of the new LCCT and is expected to take up a majority stake in the proposed joint venture with AirAsia.

7. Once completed, the new LCCT will be operated by AirAsia Bhd, but the company has repeatedly stressed that it may not own the terminal. The terminal will be primarily used by AirAsia (Malaysian operations), and its affiliates – AirAsia X (long haul), Thai AirAsia and Indonesia AirAsia.

8. Initially, the idea was that the present LCCT in Sepang will be retained for other regional low-cost carriers (LCCs) such as Cebu Pacific and Tiger Airways.

However, it has now been mentioned that all airlines at the present LCCT will move to the new LCCT in Labu. Then, the present LCCT facility will be turned into a cargo-related complex as initially planned.

9. The Labu terminal will have an annualized capacity of 30 million passengers until year 2030 (will be the largest Malaysian airport in operation when completed!). The present LCCT in Sepang can handle only 10 million passengers.

The expansion plans for the present LCCT would increase capacity to 15 million passengers by end of this year, but no further expansion was possible due to its size constraints.

The AirAsia group has carried over 7.6 million passengers in previous financial year. AirAsia’s growth estimates show that the budget carrier will carry 12.3 million passengers in 2009; 15.7 million in 2010; 19.4 million in 2011 and 30 million by 2015.

10. The Labu terminal will have 70 aircraft parking bays at any given time. The terminal will also used aerobridges unlike the existing one at KLIA Sepang.

The current LCCT has a severe shortage of aircraft parking bays and this could impede the growth of AirAsia. There are 33 bays for A320s and three bays for A330/A340.

In 2009, there will be a shortfall of 6 bays for the airline that has ordered a fleet of new aircrafts (from January 2009 onwards, AirAsia Group will take delivery of about 121 more A320s and 22 more A330s, if no more orders).

By 2010, the shortfall will grow to 16 bays. By the time MAHB’s proposed LCCT opens in 2014, the shortfall of parking bays will be 41 and there will be a 12 million shortfall at the present LCCT.

AirAsia CEO Tony Fernandes was quoted :

...by 2013, the combined annual traffic flown by both AirAsia and AirAsia X would be 60 million passengers per annum, more than SIA and Thai combined.

By then, AirAsia would have 159 narrow-body aircraft and AirAsia X would have 25 wide-body aircraft, a combined total of 184 aircrafts compared to Malaysia Airline’s estimated fleet of 125.

By 2013, only Japan Airlines would be bigger than us in terms of passengers. (Overall) We could be the second biggest airline in Asia by 2030.

11. The land area zoned for the new LCCT in Labu is 2,833 hectare.

12. The existing Express Rail Link (ERL) high-speed train services, connecting KL Sentral in the city to KLIA, will be extended 7km to connect KLIA Main Terminal and the Labu terminal. It will be a 31-minute ride to KLIA East @ Labu, an additional 3 minutes from KLIA Sepang.

13. A 7km branch road will be built to connect the new LCCT to the North South Expressway. A bus depot is also being mooted near the new LCCT.

14. In addition, a 3km railway line will be built to connect the new LCCT and the existing Labu KTM Komuter (commuter) railway station. Rail operator KTM is in discussion to start a new airport express service from KL Sentral to the Labu terminal. There is also a possibility that the rail link will include Sepang F1 Circuit.

All the costs for building the road and rail links will also be privately financed.

15. Ground-breaking for the new LCCT is rumoured slated for end of January 2009.

16. The new LCCT is expected to be completed by March 2011.

17. Latest figures show that in 2008, KLIA and KL-LCCT attracted 27.4 million travellers, far lower than the 37.8 million at Singapore’s Changi Airport and the 41.7 million at Bangkok’s Suvarnabhumi Airport.

(If you take the 10 million or so at LCCT out of KLIA, then you will surely know how under-utilised our airport is… lol)

18. KLIA has a massive land bank of about 10,500 hectare designated as airport zone.

Under the original master plan, for phase 3, the airport will be expanded to handle 75 million passengers per annum with the construction of a new satellite terminal (Satellite 2) and a new LCCT that will be capable of handling 30 million passengers alone. For Phase 4, the airport will be capable of handling 130 million passengers per annum by 2020.

*** *** ***

I wonder???

1. KLIA is a national interest whereas AirAsia’s is a private interest. Who is more important?

2. Does the government ensure the public that no private bailouts would happen if the new Labu terminal and other to-be-built infrastructures failed to make money?

It is learnt that Senai Airport Terminal Services Sdn Bhd (SATS), which took over the Senai International Airport in Johor from MAHB in November 2003 and turned it into Malaysia's first private airport, is still struggling to make a profit,

while MAHB is able to deliver a profit as its large, profitable airports like KLIA, Penang and Kota Kinabalu are cross-subsidising small, unprofitable ones such as Terengganu and Alor Star as well as due to income from its commercial or non-aeronautical businesses.

3. What is the ultimate goal of KLIA in regards to competition with Hong Kong, Singapore and Bangkok?

4. If we truly want to be a hub in Asia Pacific, why can’t we lump all air services – jet or turboprop in and out of Klang Valley in KLIA first? Have we not learnt anything from having different operators for our LRT systems?

Integration at KLIA would promote equal competition and enhance connectivity. I believe Subang should only remain as a maintenance facility and terminal for private jets.

Coupled with only two European carriers operating out of KLIA – KLM and Lufthansa, AirAsia's chief Tony Fernandes has argued that KLIA is afterall not an aviation hub in the region due to the lack of connectivity or airlines operating there apart from the fact its passengers fly point-to-point and don't need interlining facilities.

5. Why is KLIA not expanded instead when MAS and other foreign airlines could hardly utilize the entire airport capacity till today? If AirAsia moves to Labu, I believe KLIA’s aviation role will be significantly reduced.

6. They called it “KLIA East @ Labu”. But it is not a second major terminal within KLIA. In fact, it is completely out of Selangor state (KLIA in Sepang is part of Selangor).

Can anyone clarify why build a separate terminal and replicate existing KLIA facilities such as the runway, control tower, CIQ, security, hangars and maintenance, fuel storage, etc in Labu that is just 10km away from KLIA?

7. If it is not “physically intact” with KLIA, thus the IATA would give it a separate code and count the number of arrivals separately. So are we ready to see KLIA with 27 million passengers this year having less than 20 million next year if AirAsia moves out immediately?

8. How would you tell a confused foreigner that we have two airports with the name “KLIA”?

9. A lot of money has been spent on upgrading the current LCCT. What would it turn into if AirAsia moves to Labu?

10. Why isolate AirAsia from Malaysia Airlines (MAS) and other foreign airlines that still land at KLIA?

11. Will there be airport taxes at Labu and who will charge them? And who would run the new CIQ at Labu?

12. Why do we need to take a connecting train or bus to KLIA Labu in order to take AirAsia back to hometown after a long and tired flight from London? I would rather travel via Aerotrain internally within KLIA than to go out of the arrival hall to take ERL to Labu.

13. Why do we build such important facility away from Klang Valley urban centres such as Ampang, Petaling Jaya, Shah Alam and Klang?

14. I believe MAHB will be very dependant of AirAsia in terms of bringing substantial traffic to KLIA. But why MAHB hasn’t willingly persuaded AirAsia to build their own terminal within KLIA instead?

15. Why are conglomerate Sime Darby Bhd and AirAsia Bhd getting involved in airport concession development and management which is outside their core businesses?

16. A local newspaper reported that the ground-breaking for the Labu terminal will start as early as this month. Why such a hurry? I’m sure we’re not gonna cook instant noodle here.

The recent decision by the Malaysian government seems to be a win win situation for MAS and AirAsia. MAS gets the whole KLIA for herself while AirAsia gets its own terminal to fulfill their long time dreams.

As you can see, both airlines will monopolise their respective terminals, and yet they would not share common facilities.

*** *** ***

My suggestions to MAHB are as follows:

a) Build Main Terminal 2 or LCCT, preferably near to current Main Terminal, to cater to low-cost carriers like AirAsia; or

b) Sell a plot of land within KLIA to AirAsia for them to design their own terminal, as long as it could integrate well with MAHB’s masterplan for KLIA. MAHB could invite or AirAsia could appoint Sime Darby to build a world-class terminal for them.

Then, MAHB can lease and rent existing KLIA facilities to AirAsia, but the fact is AirAsia doesn’t like paying landing fees to MAHB; or

c) Build Satellite 2 next to Satellite 1. Satellite 2 focused on all domestic flights while Satellite 1 focused on all international flights.

Once either one is completed, link them up to Main Terminal with existing KLIA Aerotrain and ERL.

It is ridiculous comparing the distance between London's airports and ours because first of all London is supercrowded whereas there’s only two European airlines and a handful of Asian carriers flying frequently into KLIA. I think we don’t need to split airports unless until we are London of Asia.

*** *** ***

Other good reads: 1 2 3

The facts and figures above are based on credible local media reports. The author is not to be held responsible for any distortion of information provided above. The author is an urban development commentator-cum-researcher at Skyscrapercity (SSC) Malaysia. He can be contacted at patchayik@yahoo.com.

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