Malaysia cutting back on airline incentives

Malaysia Airport Holdings Bhd says it intends to use the money saved to reinvest in airport expansion and improve airport facilities.

KUALA LUMPUR: Malaysia Airport Holdings Bhd (MAHB) is cutting back on its incentive programme for airlines.

MAHB managing director Mohd Badlisham Ghazali told The Edge that the ongoing revision of its three-year incentive programme for airlines, would ensure incentives were more targeted.

The savings may be used to promote specific locations as tourism destinations to attract foreign tourists.

“We think there should also be some forms of rationalisation. We would like to look at how these incentives can be rejigged from the traditional, just natural volume of passengers,” he was quoted as saying.

Cutting back on incentives, he added, would allow MAHB to use the funds elsewhere, including reinvesting the savings in airport expansion and improving airport facilities.

At present, airlines that show non-domestic passenger volume growth are rewarded by MAHB via cash incentives per passenger. The incentive is paid to an incremental number over the preceding year’s volume.

For instance, if an airline had 12 million non-domestic passengers in 2016 compared with 10 million in 2015, the additional two million non-domestic passengers entitle the airline to this incentive from MAHB.

For existing airlines and routes, the incentive ranges from RM10 to RM15 per Asean and international passenger, according to the report.

However, on new airlines and routes, a year-on-year increase in Asean passengers to the Langkawi, Penang, Kuching and Kota Kinabalu airports entitles the airlines to RM25 per passenger in the first year.

New airlines also enjoy free parking and landing charges for the first three years.

Badlisham told The Edge the incentive programme – both per passenger payments and foregone revenue from free parking and landing charges – had cost the airport operator RM800 million over the past decade. - FMT