AirAsia sees dark side of MAHB award

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KUALA LUMPUR, 20 December 2018 – Against a backdrop of a challenging economy and falling profitability in corporate Malaysia, Malaysia Airports Holdings Berhad won a major Malaysian award last week, topping billion ringgit companies for giving its shareholders the best three-year returns in its class.

It didn’t go down well with AirAsia, arguably the airport group’s largest customer.

Offering a backhanded compliment the airline said “Kudos to MAHB. But then, it is not difficult to keep showing such numbers when you are a monopoly.”

MAHB’s net profit more than tripled in 2017 to MYR237 million from MYR73 million in 2016 – itself nearly double from MYR40 million in 2015 – and it is set to break yet another record this year.

In the write-up that accompanied the award, the sharp increase in profits was attributed to two reasons: an increase in Passenger Service Charge (PSC) and growth in passenger numbers coming through its airports.

Nevertheless, AirAsia scolded MAHB for “unjustified price increases, such as the PSC hike”, which it said would lead to unintended consequences when its clients, who have no choice but to use its services, are eventually squeezed out of business.

“Then, everything will collapse – Malaysia’s tourist arrivals, billions in tourism receipts and revenues to MAHB’s own coffers (a fact it has failed to acknowledge).”

MAHB owes its vastly improved performance to its structural monopoly.

AirAsia’s critical response claimed “MAHB rewards itself with excessive monopoly profits, yet it provides the Malaysian public with embarrassingly low service levels.”

AirAsia X Malaysia CEO, Benyamin Ismail, added fuel to the fire of criticism: “In addition to the MYR50 PSC it already imposes, MAHB is now demanding an additional MYR23 from each passenger travelling through klia2.

“The millions of passengers departing from klia2, more than 90% of whom fly with AirAsia, will attest to the long walks they have had to endure to reach their gates in what is a passenger-unfriendly airport with inferior facilities yet unjustified high charges.”

He continued: “Furthermore, since klia2 opened, there have been constant flight disruptions and cancellations due to major apron and runway defects, unscheduled closure of runways and fuel pipeline ruptures.”

Acknowledging the airline was sued after the group refused to collect the extra MYR23 per passenger, the airline boss said he would “vigorously fight this suit.”

“ We will not be part of this scheme to burden the travelling public by making them pay more for below par services.”

Benyamin added that while the operating results of klia2 itself were not immediately apparent, AirAsia estimates that MAHB’s returns on capital are well in excess of the level of the cost of capital set by regulators.

AirAsia Malaysia CEO Riad Asmat said, “The overall tourism sector, one of Malaysia’s biggest revenue earners, and the interests of millions of Malaysians who have been able to fly because of the low fares pioneered by AirAsia, are being threatened by MAHB’s price hikes.

“We urge the regulators and policy makers to rebuff this unfair and unreasonable attempt by MAHB to use its monopoly to enrich itself further by revisiting and rescinding the decision to raise the PSC.

“MAHB has argued it needs more profits to operate smaller loss-making airports on behalf of the government, but it is obvious from its exponential growth in profits over the last three years – even after taking into account losses in its Turkish operations – that this is not the case.

The additional MYR23 to be collected will amount to more than MYR100 million a year that will go straight to MAHB’s bottom line rather than to the government.

AirAsia said it “would take battle both to the people and to the court of law.”

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