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KLIA East @ Labu

LTAKL Timur @ Labu
Artist rendering of KLIA East @ Labu
Summary
OperatorAirAsia, Sime Darby
LocationLabu, Negeri Sembilan, Malaysia
Time zoneMST (UTC+08:00)

KLIA East @ Labu, (or KLIA-East or KLIA 2), was a proposed budget carrier international airport. It would have been the third civilian airport serving Kuala Lumpur and the surrounding Greater Klang Valley area in Malaysia, after Kuala Lumpur International Airport (KLIA) and Sultan Abdul Aziz Shah Airport (Subang Airport).

The airport was to be located at Labu, Negeri Sembilan, which is 8.6 kilometres away from KLIA. It was proposed by AirAsia, a Malaysian low-cost airline, to replace its use of the low cost carrier terminal (LCCT) at KLIA. The airport at Labu was intended to serve AirAsia only, and the other airlines serving Kuala Lumpur, including full service carriers, low cost carriers as well as cargo airlines would continue to utilize KLIA.

By road, the airport is 50 km from downtown Kuala Lumpur, compared to the distance of 78 km for KLIA.[1] The construction of the new airport, on a 2,800ha area at the state’s central corridor in Labu, would have been financed by the private sector. The two parties involved in this project were AirAsia Holdings Group and Sime Darby who own the land. Construction was planned to start in mid-2009 and the new airport was anticipated to be ready by 2011.

However, after a meeting with the Cabinet Ministers of Malaysia, which includes the Deputy Prime Minister, the government instructed the airport operator of KLIA, Malaysia Airports Holding Berhad, to build a new low-cost carrier terminal at KLIA itself with close consultation with AirAsia. AirAsia will submit its wish-list and specifications to the operator for discussion.[2] The new terminal, klia2, started operations on 2 May 2014, with AirAsia moving to klia2 a week later on 9 May.

Currently the former project site is a proposed site for a Royal Malaysian Air Force base.

Background

Prior to the proposed airport, AirAsia is operating from the LCC terminal of the Kuala Lumpur International Airport. The terminal was initially build with a design capacity of up to 10 million passenger a year of which further extension to 15 million passenger a year. It was built on a fast track basis starting in June 2005 and opened 6 months later. The site was actually meant for a cargo facility with aprons for aircraft already built.

Demand for AirAsia has cause a surge in the usage of LCC terminal which resulted almost 9.5 million passengers in 2007. AirAsia was looking for new room to expand its operations and decided to use a purpose built low-cost carrier airport at a site near the current airport. It was reported on December 2008 that Sime Darby, the land owner for the new airport and AirAsia has given a green light for the building of the new airport in Labu, Negeri Sembilan.[3] It was reported that the cost of building the airport will be totally privately funded by both AirAsia and Sime Darby.[4]

The proposal and the speed of the cabinet giving it a green light has attracted many critics, including the former Prime Minister of Malaysia, Tun Dr. Mahathir Mohammed. Arguments against the airport includes duplication of facilities with the new airport and KLIA, questioning the issues on the airport will be privately funded, as some facilities such as access road may need to be borne by the government and also proximity between the two airports.

Finally, the criticism has made the cabinet to re-look the issue with the Deputy Prime Minister, Datuk Seri Najib Razak asking AirAsia to present their case to him and other cabinet ministers and the airport operator Malaysia Airports. After the presentation, the cabinet decided that the proposal is off and asked AirAsia to work with the airport operator to build a new LCC Terminal inside KLIA.[5]

Although there were talks that the decision on the airport has not been finalized yet, Deputy Prime Minister clarify that the project would not commence as Sime Darby lack funds to initiate infrastructure. He also confirmed that the new LCC terminal will be built within the Kuala Lumpur International Airport.[6]

Connectivity

The KLIA East @ Labu will be connected with KLIA Main Terminal by:-

  • A proposed 7 km branch road to link KLIA East @ Labu to KLIA and the North-South Expressway.
  • A proposed 7 km ERL link from KLIA to KLIA East.
  • A bus hub at KLIA East.

A 3 km KTM Komuter railway line also has been proposed from the railway station in Labu to KLIA East.

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

Funding

The funding for the building of the airport is reported to be based on private finance initiative (PFI). Funds is expected to be provided by Sime Darby and AirAsia. However, critics questions the validity of the claim as some aspect of the airport operations such as Customs, Immigration and Quarantine facility may need to be borne by the government. The same argument also goes for other infrastructure such as building new KTM or ERL tracks to the airport.[7]

Controversies

Arguments for building the airport

AirAsia has launch a cyber-campaign to promote the building and use of the airport. The company's chief executive office, Tony Fernandes has dubbed the airport as the Rakyat's Terminal (People's Terminal).

On its website AirAsia has listed down several justification on its need to build a new airport for its own purpose.[8] Among them are:-

  • Passenger capacity - Although the current LCC Terminal in KLIA is currently undergoing construction to enable the terminal to handle 15 million passenger a year, AirAsia expects that the terminal will only hold the passenger growth for only one year. The company anticipates to handle 25 million passenger through the terminal on 2013 which a short fall of over 10 million passengers. There was also concerns that MAHB may not be able to build the new LCC Terminal in KLIA on time to accommodate the expanding fleet of AirAsia aircraft. In addition, there has been complaints the present LCCT is "a little more than a shed", and concern the new LCCT may not be that much better standard.
  • Runaway capacity - AirAsia claims that KLIA LCC terminal does not have the capacity to cope up with peak hour aircraft movements. They are expecting to have 159 Airbus A320 and 25 widebody Airbus A330 by 2013.
  • Connectivity - AirAsia claims that there are poor connectivity on the terminal
  • Airport facility - AirAsia claims that waiting time for taxiway has increased due to huge airport layout. They also claimed that the number of gates needed for their operations in the future are insufficient.
  • Autonomy - AirAsia purports it would not have any say in the new facilities in KLIA and that Malaysia Airports Berhad, the operators of KLIA, intends to build. The airline fears that landing and other charges could rise. It thus announced a plan to build its own airport which it claims will be built on time and to keep expenses low. There has been frustration by AirAsia in the poor performance of the KLIA operators.

AirAsia has also list down the justification of choosing the site for the airport.[9] Among them are:-

  • Location - The new location is cost efficient, good connectivity to highways and railway lines, and a readily available land. The land is owned by Sime Darby. AirAsia also claimed that the land proposed by the airport operator, Malaysia Airports is unsuitable due to Express Rail Link height and power issues. The land is also has poor soil quality making it more expansive and time costing to develop. AirAsia claims that distance between both airport runaways exceed international standard of 2 km.
  • Access - AirAsia claims that the new terminal has seamless connectivy via road and rail.
  • Passenger Capacity - According to AirAsia, the phase 1 of the airport will able to handle 30 million passenger a year, and phase 2 will able to handle 50 million per year.

AirAsia on its website claims that building a second terminal building opposite the current one, as envision in the KLIA master plan was not possible due to Express Rail Link powers cable height issues.[10]

According to a local business newspaper, AirAsia enjoys incentives such as waiver of all aeronautical charges except Passenger Service Charge, which is borne by the passenger expires in 2007. The incentive was given as a part of convincing AirAsia to move from Subang Airport to Kuala Lumpur International Airport. However, the incentives covers not only KLIA but all airports where AirAsia operated. Incentive covers waivers on landing, parking, aerobridge and check-in counter charges. It expected that AirAsia wants it own an airport to help better manage airport costs.[11]

Argument against building the airport

  • The International Air Transport Association (IATA) mentioned that having a single (international) airport is the preferred way to make Kuala Lumpur an aviation hub of choice. It also indicated that by having two (international) airports would mean duplication of services such as fire and rescue, air traffic control, immigration and customs, which in turn would raise the cost of air travel. Finally, the association cited potential problems in managing air traffic as the site of the new airport at Labu is too close to KLIA.[12]
  • Aseambankers have expressed concern that the proposed new airport could also split Kuala Lumpur as a destination into separate airports, especially when passenger movements currently only total 25 million per annum, which is not huge relatively by world city standards. [citation needed]
  • The Minority Shareholders Watchdog group (MSWG) has questioned the need for two LCC terminal within 10 km of each other. The group queried whether any cost-benefit analysis had been done on the project, both in financial and non-financial terms. The move of building the second LCC terminal is expected to "cannibalized" the operator of the main airport as AirAsia commands a significant traffic on KLIA.[13]
  • This concern has been supported by members of the public who also questioned whether there is really a justification for a third airport for KL, and whether it would be for or against "national interest". Like the MSWG, there is general concern that the new airport may at least seriously affect the future of KLIA as Malaysia's main gateway to the world. KLIA, it has been argued, is still underutilised for an international airport, and having yet another new international airport serving Kuala Lumpur would significantly dilute the traffic at KLIA. [citation needed] Like IATA, air safety was another concern voiced by other parties as the two airports, KLIA and KLIA-East@Labu are so close and yet they have two separate control towers (although the safety record of AirAsia to date is good). [citation needed]
  • There is also anxiety that the public, not the private sector, would end up having to foot the expensive bill to build and manage the highway and rail links from KLIA-East@Labu airport to Kuala Lumpur and vicinity. [citation needed] If that is so, some members of the public felt this would be a waste of tax-payer's resources simply for the benefit of the private entity. However, AirAsia has said in the KLIA East website that "The government via its letter from the Economic Planning Unit (EPU) to Sime Darby has also made it abundantly clear that all infrastructure costs for this project would be borne by the project developer". As for management costs of customs and control tower, etc., AirAsia indicated they need to discuss this further and it could be similar to Senai airport, which is also private.
  • In the "The Malaysian Insider" news site, the majority of comments from its readers were not in favor of the airport at Labu, and were not convinced by the case put forward by the airline (AirAsia) for the new airport. [citation needed] Even on AirAsia's own KLIA-East micro site which is supposedly biased to strongly promote the airport project, the blog messages for the airport was split with a significant number of bloggers arguing against building the airport.
  • This issue has apparently split political circles as well as Malaysian society. Even the former Prime Minister of Malaysia, Tun Dr. Mahathir bin Mohamad,who is credited with masterminding the construction of the Kuala Lumpur International Airport waded in against the idea of the new airport at Labu. In his web blog site, he explained that the KLIA Masterplan has been designed to cater for future growth, up to 125 million of passenger annually thus it has the expansion capacity to cater for all the future needs of AirAsia.[14]
  • Khazanah Nasional, Malaysia, the investment arm of the national government, has opposed the Sime Darby and AirAsia plans. However, critics believe that the agency is not an objective party as it is a major shareholder in Malaysia Airlines and Malaysia Airports Berhad[15]

Malaysia Airports Berhad, the airport operator has issues a series of press statements refuting AirAsia claims on airport charges while explaining delays on the construction of a permanent LCC terminal.[16][17][18] The airport operator mentioned that:-

  • AirAsia has been growing out of the Main Terminal Building in Kuala Lumpur International Airport. The operator constructed a separate facility to enable AirAsia to achieve operational efficiency and ultimately, allow the airline to grow.
  • The current LCC terminal was constructed based on AirAsia requirement and also with a passenger growth projection of 10 million passenger annually by 2012. The terminal was also designed to cater mainly narrow-body aircraft such as the Airbus A320 operated by AirAsia.
  • Aeronautical charges are not set by the airport operator but by the government of Malaysia. According to the operator, the chargers are already one of the lowest in the region and landing fee has not been increased for 27 years.
  • The operator has given a waiver for all aeronautical charges excluding Passenger Service Charge to AirAsia from 2002 to 2007 as an incentive to facilitate AirAsia move from Subang Airport to KLIA. AirAsia requested an extension of the incentive benefits, but the operator will give out a different incentive after the approval of airport operator restructuring exercise.

On the National Airport Master Plan study, the operator in collaboration with Ministry of Transport and Ministry of Finance, conducted a study on the direction of future development of airports and aviation infrastructure in Malaysia.

The issue is complicated by parties (on both sides) which allegedly appear to be interested only for their own benefits. What is more, some of the interested parties are companies partly or wholly owned by the government, or have links with the government. It seems less and less clear where politics come in, where decision is based on pure business, and which decision is truly in the "national interest". There has also been confusion on decisions from the Cabinet. Although it has approved the project earlier, the latest report from local free newspaper is the Deputy Prime Minister has now said "We are studying the matter from all angles to see if the project should go ahead or if we can make some different arrangements.".[19]

According to Singapore-based Straits Times economists and bankers have said of the debacle, "The wrangling (between the various parties) also highlights the (Malaysian) government's inability to rein in poor- performing public enterprises and pursue policies to maximise the use of resources." It also indicated "how the dominance of state-controlled agencies often stifles entrepreneurship (in Malaysia)". Analysts are calling for the Malaysian administration to referee the case (see External Links below). Air Asia is currently the largest and the most successful budget airline in the whole of Southeast Asia, pioneered by Malaysian entrepreneur Tony Fernandes. He privately bought Air Asia, then an ailing government-linked airline and turned it around as a no-frills budget airline until it was profitable and publicly listed but the public also pointed out that Air Asia receive a lot of benefits like tax waiver incentives, landing rights being fast tracked and also being given lucrative routes that previously serviced by the government-linked Malaysia Airlines.

References

  1. ^ Wong Chun Wai (2 January 2009). "KLIA East@Labu". The Star. Archived from the original on 11 March 2012. Retrieved 12 January 2009. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
  2. ^ Hamidah Atan and Regina Lee (31 January 2009). "Malaysia Airports will build low-cost terminal". The New Straits Times. Archived from the original on 10 April 2009.
  3. ^ V. Vasudevan (20 December 2008). "'KLIA East @ Labu' gets government go-ahead: Airport part of 'massive city'". New Straits Time. Archived from the original on 10 April 2009. Retrieved 11 February 2009.
  4. ^ Sarban Singh (20 December 2008). "Proposed LCCT to be privately funded". The Star (Malaysia). Archived from the original on 7 October 2012. Retrieved 11 February 2009.
  5. ^ "Another look at Labu LCCT". The Edge. 23 January 2009. Retrieved 11 February 2009. [dead link‍]
  6. ^ Eddie Chua (23 February 2009). "Sime Darby lacks funds, new terminal to be built within KLIA". The Star. Archived from the original on 7 October 2012.
  7. ^ "Sime Darby gets govt nod for Labu LCCT plan". The Star. 5 January 2009. Archived from the original on 11 March 2012. Retrieved 13 January 2009. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
  8. ^ "KLIA East:Justification". AirAsia. Archived from the original on 2 December 2011. Retrieved 28 January 2009.
  9. ^ "Why KLIA-East". AirAsia. Archived from the original on 2 December 2011. Retrieved 28 January 2009.
  10. ^ "KLIA East FAQ". AirAsia. 16 January 2009. Retrieved 19 January 2009. [dead link‍]
  11. ^ Leong, Doreen (12 January 2009). "Corporate: Why AirAsia wants its own airport". Retrieved 19 January 2009. {{cite news}}: Cite has empty unknown parameter: |coauthors= (help) [dead link‍]
  12. ^ "IATA: Focus on maximising KLIA's potential" (PDF). 16 January 2009. Retrieved 23 January 2009. [dead link‍]
  13. ^ "MSWG questions viability of 2 LCCTs". 15 January 2009. Retrieved 19 January 2009. {{cite news}}: Cite has empty unknown parameter: |coauthors= (help) [dead link‍]
  14. ^ "How many airports do we need, Dr M asks". Shannon Teoh. The Malaysian Insider. 6 January 2009. Archived from the original on 24 May 2014. Retrieved 24 May 2014.
  15. ^ "Khazanah Not Supportive Of LCCT In Labu". Bernama. 19 January 2009. Archived from the original on 28 March 2012. Retrieved 20 January 2009.
  16. ^ "Press Statement by Malaysia Airports Berhad". 5 January 2000. Archived from the original on 17 February 2012.
  17. ^ "Malaysia Airports Clarifies (2)". Malaysia Airports Berhad. 20 January 2009. Archived from the original on 1 June 2014. Retrieved 23 January 2009.
  18. ^ "Malaysia Airports Clarifies (1)". Malaysia Airports Berhad. 20 January 2009. Archived from the original on 17 February 2012. Retrieved 23 January 2009.
  19. ^ Maria J. Dass (23 January 2009). "Najib: Govt yet to decide on LLCT at Labu". The Sun. Retrieved 28 January 2009.

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