Tag Archives: LCCT

What’s Your Problem, Tony?

No, I’m not referring to Tony Stark- the narcissist billionaire who literally fly with his iron suit.

Rather, I’m talking about our homegrown billionaire-  Tony Fernandes who enabled more people to fly.

KLIA2

KLIA2

WHEN IT STARTED

For those who still remember, in 2009 Sime Darby and AirAsia proposed a RM1.8 billion LCCT project in Labu. The reason? AirAsia- the fastest growing and largest low-cost airline in Asia needs a permanent home. But why they refuse to locate their home in KLIA when Klia has 25,000 acres, bigger than Putrajaya is still a mystery. Maybe there is still not enough space for the 25 million Air Asia passengers.

Another reason is, AirAsia should operate their own airport because according to them, MAHB is not an efficient airport operator. MAHB has purchased the wrong radar, MAHB can’t use KLIA’s sophisticated conveyor belt really well, MAHB fails to upgrade KLIA’s security, MAHB this and MAHB that. Therefore AirAsia should step in and become the airport operator.

Never mind if MAHB operates second world’s best airport in the world and consistently paid the concession fees and taxes to the Government, issued dividends to shareholders, paid incentives to airlines and remained profitable for the past 15 years.  For AirAsia, it still not good enough.

But the biggest argument against Labu Airport is its nearness to KLIA. No city in the world that built two different airports with two different operators and two uncoordinated control towers in just 10km radius. With 70 air crafts movement and stacking before landing for each airport per hour, the possibility of crashes is very real. Presumably this is the main reason why the project later canceled and replaced with a KLIA2- located 1.5km away from KLIA with a new control tower to better manage all three runways including KLIA and of course with MAHB as the airport operator.

ROUND 1: COST AND DELAY

A respected billionaire like Tony Fernandes should not mislead the public by making a statement like- ‘it hard to believe that an airport that has delayed a terminal by three years and cost increase from (RM) 2 billion to 4 billion has so much credibility.’

Truth is, the cost of KLIA2 has been doubled due to revision to increase 71% of its original capacity. What started as a 150,000sqm terminal with 50 semi-contact gates and 2.5km runway to cater 30 million passengers per year has now become a 257,000 sqm terminal with 68 gates fully aerobridges and 3.9km runway for 45 million passengers per year.

Guess where the revised plan is based from? AirAsia’s growth projection. Even in 2013, AirAsia has flown more than 21.85 million passengers in LCCT. With 3% growth annually, the original KLIA2 will be crowded in 10 years’ time. So do we built a new airport only to last for 10 years?

Comparison- original and revised

Comparison- original and revised

And guess who benefits the most from the construction of a larger KLIA2? AirAsia and its passenger. Even with 71% larger than the original KLIA2, AirAsia will occupy 80% of spaces in the new airport.

As far as KLIA2 cost is concerned, it is hardly “cost overrun”. The extra money was spent to get more facilities rather than spending more to get the same.

Now as for the delay issue. Admittedly some of the main contractors have failed to meet their self-imposed dateline. The contractors have blamed poor soil conditions for the delay. However, AirAsia has equally to be blamed on this matter.

First, they had requested the semi-automated baggage handling system (BHS) that was first planned be changed to a fully automated BHS, which MAHB acceded to. At this juncture, 40% of the project had been completed as per October 2012 deadline and AirAsia late request has resulted 6 months delay to the project

Second, MAHB has agreed to make the distance between the present runway 2 and the new runway 3 to be 2.5km. This is to provide more space to AirAsia  for maintenance, repair and overhaul activities.

Third, AirAsia also had its way when it asked the length of runway 3 to be extended to 4km from 2.2 km.

No wonder MAHB has said they have given almost everything AirAsia asked for at KLIA2. Only spa and museum can’t be granted.

So Tony, why do you still need to stir a cauldron of hatred towards MAHB-the gracious airport operator who bowed down to every single demand you have made?

Or maybe the refusal to move in has something to do with…. airport tax?

ROUND 2: AIRPORT TAX

AirAsia is already telling the public to brace any airport tax increase. If their assumption that the airport tax at KLIA2 is going to be the same with KLIA is true, international traveller will have to pay extra RM33 and domestic traveller is extra RM3.

But this increase should be taken into perspective that  KLIA2 is unlike any low-cost terminal aka ‘cargo warehouse’. It is not a low-cost terminal, but the airlines that utilise it are low-cost. It means the extra RM33 and RM3 will go for the vast retail space, a fully automated Baggage Handling System (BHS), aerobridges and smooth connectivity to the KLIA main terminal building and KL Sentral by ERL.

Strangely, Tony Fernandes wants all these facilities come cheap. He wants the airport tax remains the same or possibly lower. What make his demand ludicrous is that, it comes from someone who charge his customer for everything extra service they needed.

If you pay peanuts, you get monkeys or AirAsia. That is what Tony’s low cost business is all about.

Who charge less for more? Even AirAsia has to charge RM6 per credit-card transaction. So why can’t MAHB do the AirAsia way?

Anyway, three things Tony should know on airport tax.

First, airport tax at KLIA2 has yet to be decided. Even if Tony wants to jump the gun, why direct it to MAHB when airport tax is determined solely by the Government as enshrined in the Civil Aviation Act 1969.

Second, the airport tax in Malaysia is not linked with the construction cost of the terminal. When operations were moved from Sultan Abdul Aziz Shah Airport in Subang to KLIA in 1998, the airport tax remained the same in spite of the cost of the brand new airport. In fact in some cases, airport tax was reduced as was the case with the new terminal in Melaka where the tax was reduced from RM51 to RM25.

It means, there are possibility the airport tax in KLIA2 may be the same or lower. But even if the airport tax is higher, it is justified because of the facilities provided.

Third, airport tax is paid by passengers. Airlines only take the tax from passengers on behalf of the airport operator. So, if the airport tax is to be increased, there is little impact on airlines’ cost structure. Unless AirAsia’s business model is to subsidise airport tax just to ensure lower fare to the customers. But as far as AirAsia is capable of, not only they collect airport tax from passengers, they make payment to the airport operator until the government agreed to give them discount.

So what’s next? Aaaahh, safety and security issue.

ROUND 3: SAFETY AND SECURITY

Now Tony in his own words said ‘the main point is we wanted a safe and secure terminal. Ask MAHB how long operational readiness (Orat) takes? MAHB has not even received the CCC. How can we test the operational readiness of the airport?”

Tony speaks like the current LCCT is the safest terminal in the region and equipped with top notch security features.

The fact is, unlike present LCCT, KLIA2 has an inbuilt segregation of arriving and departing international passengers and this segregation is to strengthen safety and address the human trafficking and drug issue.

KLIA2 also is more secured than the current LCCT as it would implement a commonly-used passenger processing system by SITA —  the world’s leading service-provider of integrated IT business solutions.

The fact is- AirAsia refused to use the SITA system as it was insisting on using the manual check-in system. If you look at the current LCCT, it is a totally manual airport, where airport management is done in a traditional manner. What security then Tony?

As for the cracks found on the runway, it was not structural cracks as KLIA2 sits on land that consists mainly former oil palm plantations and mangroves with at least 40m depth of soft clay. Even many other airports in the country experience such superficial cracks.

To ensure that the runway is safe for aircraft landing, proof rolling and compacting the runway surface are conducted using 100-tonne proof roller. Even the big Airbus A380 can land and take off the new runway. Not only that, Malindo Air had undertaken a landing trial at klia2 in October last year to show that the runway is in good condition.

Again, Tony should remember the Department of  Civil Aviation (DCA) is the right authority to certify the runway, and not the airline. The new airport had also received the approval from independent consultant, Ikram Premier Consulting. But I suspect it still not assuring enough for Tony.

How about the CCC? With the last mile of works , which is the sewerage rectification, completed and IWK (Indah Water Konsortium) satisfied, KLIA2 will obtain the CCC between April 15 and 20.

ORAT should not be an issue as, since February Orat has been conducted successfully with 500,000 bags in the test and the system has proven to be stable. No major issues are anticipated.

Generally, ORAT is undertaken over one year but some airport operators do it in six months.

In klia2’s case, MAHB can complete the testing and commissioning within three months because KLIA has a similar system. Therefore comes May, the airport is ready for operation.

To test Tony’s sincerity on safety of passenger, we should ask why AirAsia refuse to use aerobridge when it is extremely useful during bad weather conditions such as heavy rain or sweltering heat especially to those who were physically challenged, senior citizens, and mothers with infants and small children.

Is Tony more concern about the cost 25 sen per passenger he has to absorb?

ROUND 4: AIRASIA SURVIVAL

Without a doubt, AirAsia has enabled more people to fly. To certain extent, Tony may do Malaysia a favour. But Tony’s marketing gimmick and business acumen alone are not enough in propelling AirAsia to where it is now today. The underlying factor has always been- Malaysia’s business friendly environment.

Just look at numerous assistance rendered to AirAsia.

First, the current LCC terminal which cost RM108 million has been completed in 9 months just to support AirAsia’s growth. Previously, AirAsia was operated in Subang and refused to move to KLIA.

Second, airport tax in existing LCCT (where AirAsia starts to grow regionally) was reduced to RM25 from RM35.

Third, exemption from using aerobridge has been granted by MAHB just to support AirAsia’s business model that requires a quick turnaround time.

Fourth, the special airport incentives MAHB gave to AirAsia Bhd over the past 10 years despite not being the biggest contributor to the airports operator’s revenue or passenger traffic.

Fifth, discount or incentive amounting to RM25 million courtesy of the Malaysia’s government to Tony Fernandes’ airline company so that they settle their airport taxes owed to MAHB.

Sixt and ultimately- the new RM4 billion KLIA2 is commissioned to cater AirAsia’s growth, again.

Of course any businessman would hate to contribute their success to the government’s policies and assistance. It will insult their ego.

But considering Air Asia’s success can’t be emulated in any of the other markets where Tony has entered, this only prove that only Malaysia has given Tony the opportunities.

In Japan, the joint-venture with All Nippon Airways has been terminated by partner.

In Indonesia, the purchase of Batavia Air has been scrutinised by regulators.

In India, the deal with Tata has been objected by competitors.

In Malaysia? They started as a monopoly low cost carrier with numerous assistance from the government.

Just look at Malindo Air. The fact that they can operate just within 6 months show how the government is supportive towards low cost airline industry in Malaysia. Malindo Air has flown more than 1 million passengers less than a year. Obviously it has something to do with policies made and carried out by the government.

To Tony Fernandes, you need Malaysia more than Malaysia needs you. Think.

MatRodi

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