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Friday, January 9, 2009

> KLIA East: AirAsia's boss explains why

The facilities provided by Malaysian Airports Holdings Berhad (MAHB) and the services offered by AirAsia simply do not add up.

According to the budget airlines' chief executive officer Tony Fernandes, this is the reason why the company will be shifting its operations from the Low Cost Carrier Terminal (LCCT) at the Kuala Lumpur International Airport (KLIA) in Sepang.

The airline's new airport, dubbed KLIA East, will be located in Labu, Negeri Sembilan and will feature all the facilities of a full scale airport. The RM1.6 billion joint venture project with Sime Darby Bhd is slated to commence in 2011.

"We believe in lowering our business costs, it is the key to our success," Fernandes told a press conference at the Sepang LCCT conference room this morning

"The new airport will provide more capacity for aircraft and passengers, and enable us to bring down fares," he said, adding that costs could be lowered by 30 percent.

Fernandes also rejected criticism that KLIA has more than enough capacity to handle AirAsia's growth plans, and that the sprawling city has no need for what would be its fourth airport.

"I think we know what we need, we are not silly," he said. "There is nothing here (at the old terminal) to add value to our passengers. Allow us to take our destiny in our own hands."

Once expansion work is completed on the Sepang LCCT, it will have a passenger capacity of 15,000,000 but Air Asia projects that by 2011, it will fly 19,416,000 passengers to Kuala Lumpur, resulting in an overflow of 4,416,000 passengers. 

"We know what we need (for our business). You could put 100 staff to operate the baggage system but when you only have two baggage carousels…," said Fernandes. 

He added that the airline does not need "high facilities" like "marble floors" and does not wish to pay for them either.

"We are put in the middle of nowhere, we are surrounded by cargo…there is nothing here to add value to our airport…nothing here to create economic growth," he lamented. 

Given two alternatives

Fernandes also revealed that MAHB had presented two alternatives to Air Asia to construct the facilities needed for its expanding operations.

One proposal was an area located north of the current LCCT. However, the area does not contain a runway and would have taken four years to construct the required facilities.

According to Fernandes, this idea was scraped without any explanation.

Furthermore, he explained that the Express Railway Lane (ERL) track in the vicinity had also posed a problem.

"The track is too high. In order to get from the parking lot to the highway, we would have had to build a bridge. It is impossible for a plane to fly (close to) over a bridge the last I checked," he added. 

The other spot offered to Air Asia was located in the west, opposite the control tower. But Fernandes claimed that poor soil condition in the area would make it too costly and time consuming to develop.

Commenting on the potential expansion of the KLIA terminal, Fernandes said when the KLIA master plan was drawn, it had not taken the Sepang F1 circuit into account. As a result, he said that much space in the surrounding area has been taken up.

Labu is located just south of Nilai and is 22 km east of the KLIA main terminal. The site is currently a palm oil plantation owned by Sime Darby Bhd.

The terminal will be connected to the existing Kuala Lumpur-Seremban highway and railway line. An express train journey from Kuala Lumpur to KLIA East will take 35 minutes. 

KLIA East will be privately financed, either by Air Asia Bhd, Sime Darby Bhd, a third party or a combination of these parties. The airport will initially be built with enough capacity for 30 million passengers per year. There is enough land to expand KLIA East to accommodate 50 million passengers        

"We have a fantastic partner, it will enhance tourism. We will also have a theme park, it will be like Orlando airport where Disneyland is located," Fernandes said.
MAHB posted a press statement on their website on Jan 5. MAHB had stated that it realised the importance of low fare travel and the role Air Asia had played in its development.

The current LCCT has just undergone a RM170 million renovation. This brings the total amount spent on the LCCT to 278 million financed by the government. 

Contacted yesterday, MAHB's senior general manager for finance services Faizal Mansor said that the LCCT, which is undergoing a RM170 million renovation, will be converted into an area to accommodate cargo and other services such as hangars - Malaysiakini.