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Let's avoid terminal problems
24 December, 2008
WHAT'S more curious than a listed company coming up with a huge project that makes you go, "Huh?" How about TWO listed companies jointly mooting such a proposal?
Given their size and the reach of their businesses, it's only natural that Sime Darby Bhd and AirAsia Bhd are in the news practically all the time, but because a recent development involves both companies, the impact was amplified.
At the heart of this is a proposal to build a private low-cost carrier terminal (LCCT) in Labu, Negri Sembilan for RM1.6bil, excluding the land cost, which is subject to a valuation later.
In separate statements issued on Tuesday, AirAsia and Sime Darby said they had jointly expressed an interest to the Government to develop and operate the LCCT on Sime Darby's land. They said the project was in the initial planning phase and they are in preliminary discussions with the state and federal authorities.
Sime Darby added that the terminal is an important component of its development plan for its Negri Sembilan Vision City, which is part of the company's Central Vision Valley property development project spanning Selangor and Negri Sembilan.
On the same day, senior executives from both companies held a joint media briefing to address the reports and speculation on the project. They asked that they not be named because the project had yet to get the official nod.
It was an unusual arrangement but it showed that the two companies wanted to ensure that they had a shot at shaping public opinion this early in the game. Indeed, there were - and still are - many questions to be answered.
The media briefing took care of several of them. We were told that project would not involve public funds and that Sime Darby will only develop the LCCT (which will be called KLIA-East@Labu) and not operate it.
We also learnt that the idea came from Sime Darby and AirAsia responded positively because it didn't want to wait for Malaysia Airports Holdings Bhd to upgrade the current LCCT at the KL International Airport (LCCT-KLIA).
And here are some of the things that the executives could not say at this point - how exactly the Labu project will be funded, whether MAHB will be involved eventually, and whether AirAsia plans to wholly own KLIA-East@Labu.
AirAsia has made a pretty convincing case for the new LCCT by arguing that it's fast running out of capacity at the existing terminal, and that KLIA-East@Labu is not as far from KLIA and the city as people thought.
But could there be another reason? In a Star report on Dec 21, a senior AirAsia official was quoted as saying: "MAHB is charging us too much. We have been looking for another place for a long time, whether it was to buy or build a new airport."
It's interesting to see how the Government will decide on this matter.
On one hand, there's absolutely nothing wrong with allowing entrepreneurship to find its course. If AirAsia and Sime Darby are certain that they can undertake this project without spending a single sen from the taxpayers, maybe we should hear them out.
After all, if it benefits travellers, brings development to Labu and its surrounding areas, and ultimately boosts the economy, nobody ought to complain in principle.
But there are policy issues to consider. Should parties other than MAHB be allowed to own and run airports? The Government has set a precedence by allowing the privatisation of the Senai International Airport, but is this the path we want to take? When is it appropriate to let the other companies control airports?
And what of MAHB's plans for the LCCT-KLIA and the upgrading? These would not have factored in the likelihood of AirAsia going off to Negri Sembilan to establish its own terminal. And it was only this week that the Government had approved MAHB's long outstanding restructuring scheme.
If AirAsia had problems with MAHB's charges and the progress of the LCCT-KLIA upgrade, couldn't the Government have stepped in to help work things out?
And is it the plan that only the airlines in the AirAsia group will use KLIA-East@Labu? If not, how will other low-cost carriers feel about using a terminal set up by a competitor?
Undoubtedly, some of these questions have satisfactory answers. But ultimately, whatever the Government decides should address both KLIA-East@Labu and LCCT-KLIA.
Errol Oh is deputy editor, business, at The Star. He has never been to Labu and has nothing against it. He just hopes there's wisdom behind all large projects
This article is a verbatim copy of the original article from The Star.