A pyrrhic victory for Malaysia Airports?

If AirAsia moves to KLIA main terminal, what was the point of building a huge LCCT at high cost as it would have been much cheaper to expand and upgrade the main terminal.

COMMENT

By C Y Ming

Malaysia Airport Holdings Berhad’s new low-cost carrier terminal, opened in May 2014 after many delays and cost overruns. After pouring in billions of ringgit, it was no longer appropriate to call it LCCT and it was renamed klia2, creating confusion in the absence of a KLIA1.

In order to recoup investment, there were many attempts to increase airport tax, also known as Passenger Service Charge (PSC), a fee charged to passengers for using airport facilities. Carriers using the main terminal at KLIA, such as Malaysia Airlines, and even the International Air Travel Association, were rallied to drum up support.

Finally on Oct 31, the Malaysian Aviation Commission (Mavcom) announced new PSCs for KLIA, klia2 and other airports throughout the country. PSCs for international flights was increased by RM8 at KLIA, and RM18 at klia2. Differences in airport tax at these two terminals were removed for flights to domestic and Asean destinations.

AirAsia is planning to move from klia2 to KLIA by January, as there will be no advantage to remain at the LCCT with poorer facilities.

MAHB, instead of admitting that it may have killed the goose that lays the golden egg, then declared it was open to discussions for airlines to operate from either KLIA or klia2.

The reality is that many shops at klia2, which is also a big shopping mall, will be forced to close down if AirAsia were to relocate to the main air terminal. If so, what was the point of building a huge LCCT at high cost? It would have been much cheaper to expand and upgrade the main terminal.

It is difficult to fathom what MAHB’s strategy was.

MAS was in the same bracket when it contemplated operating from klia2 in order to be more competitive, forgetting that it is a premium airline. AirAsia remained focused. Shifting to the main terminal added value for its passengers who would no longer enjoy a lower PSC at klia2.

If MAS believes klia2 is just as good, as it has often claimed to justify the same PSC at both terminals, then it can exchange places with AirAsia and perhaps throw in some cheap flights. If that were to happen, MAS would be rolling back to 1972 when it first started, instead of building on its success over the years.

MAHB did well by opening the first LCCT in 2006 and contributed to the rapid growth of budget travel throughout the region. Now it seems to have suffered amnesia when it failed to make any distinction between an award-winning main terminal catering to premium airlines and a LCCT meant for budget carriers, by pushing for the same PSC.

With Mavcom announcing that airport tax at klia2 be increased by 56 per cent for international flights and 83 per cent for domestic flights from January next year, MAHB appears to have won. It may well be a pyrrhic victory.

The collateral damage would be too high for the tourism industry when the growth of budget travellers is slowed or the numbers drop.

C Y Ming is an FMT reader.