Special Feature

Investor sentiment is MASkargo's priority

There is little doubt that the KL International Airport (KLIA) ranks as one of the best airports in the world.
Of course when Malaysians such as ourselves say that, there is some justifiable suspicion of bias.
But it is not just we who are saying it, but also respected international organisations such as Skytrax, Time, Bloomberg, Conde Nast, and Air Transport World to name a few. In 2008 alone, KLIA was named The World's Best Airport (15-25 million passengers per annum) at the Airports Council International-Airport Service Quality (ACI-ASQ) Awards, as well as the 2nd Airport Worldwide and 2nd Best Airport Asia Pacific at the same ceremony. In fact, since its opening in 1998, KLIA has consistently received praise and accolades for its excellence.
The success of KLIA is a reflection of a commitment to excellence that is part and parcel of the
corporate philosophy behind its operator Malaysia Airports Holdings Berhad (MAHB).

A commitment to excellence

Incorporated as a public-listed company in November 1999, MAHB was the first airports operation company to be listed in Asia, as well as the sixth in the world. Its lineage however can be traced back to 1991 when the Parliament of Malaysia passed a bill that separated the Department of Civil Aviation (DCA) into two distinctive bodies with separate scopes of responsibility.

Before the Act of Parliament, the DCA - which is a body under the Ministry of Transportation - was responsible for the management of air traffic and air transportation in Malaysia, as well as the operations of the airports in the country. Under the corporatisation plan, Malaysia Airports Berhad was established to operate, manage, and maintain the airports, while the DCA remains the regulatory body for all air transport related matters in Malaysia.

Today, MAHB operates and manages 39 airports in Malaysia, comprising of five international airports, 16 domestic airports, and 18 Short Take-Off and Landing (STOL) ports. Among the airports in its portfolio are the aforementioned KLIA, Kota Kinabalu International Airport, Langkawi International Airport, Kuching International Airport, and Penang International Airport. Furthermore, MAHB has also been tasked with managing airports overseas - most notably the Astana International Airport in Kazakhstan, the Delhi International Airport in India (better known as the Indira Gandhi International Airport), the New Hyderabad International Airport in India (better known as the Rajiv Gandhi International Airport, and the Sabiha Gokcen International Airport in Turkey.

The fact that Malaysia Airports has been invited to manage these airports is testament to its commitment to excellence. It is a reflection of its mission statement where it pledges to provide world class aviation gateways, manage cost-effective airport network and services, and exceed the expectations of customers, shareholders, and other stakeholders.

Furthermore, while the company's core business is focused on managing, operating, maintaining, and developing airports; it also has a number of subsidiaries that offer a range of products and services. As such, MAHB is able to generate revenue from non-aviation/non-aeronautical sources such as duty free operations, hotel operations, and the leasing of commercial space.

A year of growth and consolidation

While as of time of writing, the financial results for 2008 have yet to be released, one can see the impressive rate of growth that MAHB has enjoyed by looking at the results from 2003 to 2007. In 2007, for example, the company recorded revenue of RM1.384b compared to RM1.146b in 2006, RM1.112b in 2005, RM1.024b in 2004, and RM894m in 2003. Similarly, pre-tax profits stood at RM403.6m in 2007 compared to RM263.3m in 2006, RM277.1m in 2005, RM196.6m in 2004, and RM151.6m in 2003. In a nutshell, Malaysia Airports has enjoyed robust growth over the past few years, which is best indicated by the more than 50% jump in pre-tax profits from 2006 to 2007.

Apart from positive financial results, 2007 was also marked by KLIA recording one of the highest percentage growth in passenger traffic as compared to other major airports in the region. The airport enjoyed a 9.63% growth in passenger traffic, which pushed it up to 26.5 million people during the year - behind the Philippines' Ninoy Aquino International Airport in Manila (14.1% to 20.5 million passengers) and ahead of Hong Kong International Airport, Thailand's Suvaranbhumi Airport Bangkok, Indonesia's Soekarno-Hatta International Airport Jakarta, Singapore's Changi Airport, and the Brunei International Airport.

Furthermore, KLIA holds a unique distinction of being having one of the lowest passenger service charges (PSC) and passenger service security charges (PSSC) in the region, as can be seen in the accompanying graph. It also boasts one of the lowest landing charges in the region, which is reflected in the next graph.

Thus, it comes to no surprise that in 2007, five new airlines touched down in KLIA - starting with Abu Dhabi's Etihad Airways on the 18th of January, followed by Bangladesh's GMG Airlines on the 24th of the same month, EgyptAir on the 2nd of June, Australia's JetStar on the 9th of September, and Air India Express on the 28th of October.

Apart from welcoming these airlines to KLIA, Malaysia Airports also further expanded its reach overseas in 2007 with deals being struck for it to manage the Sabiha Gocken International Airport in Turkey and the Astana International Airport in Kazakhstan.

After an exciting 2007, 2008 proved to be no less eventful for MAHB. While KLIA welcomed Air Niugini from Papua New Guinea, the Low Cost Carrier Terminal (LCCT) saw Tiger Airways touching down on the runway.
The latter thus became only the second fully foreign-owned liner to touch down at the LCCT since its opening in 2006, and further enhanced its growing reputation as a hub for low-cost flights.

Another breakthrough which took place in 2008 was when Malaysia Airports became the hosts for the 14th World Route Development Forum (Routes) in Kuala Lumpur from the 12th to the 14th of October. This is a testament to the respect that Malaysia Airports Holdings commands among its peers, and Malaysia became the first Asian nation to host the leading airport-airline networking event. This has thus reinforced Malaysia's position on the international aviation map.

Behind the success

It would not be wrong to say that a good part of MAHB's success comes from its ability to utilise technology and the human touch to create airports that meet the needs and demands of the modern traveller. Airports have after all evolved from being mere buildings or terminals, to being the first impression that foreign visitors have of the country. And this is why it is important that KLIA continues to be amongst the best airports.

As such, it is the first airport to utilise the state of the art Total Airport Management System (TAMS), which is managed by Malaysia Airports Technologies - a subsidiary of MAHB. TAMS is a revolutionary system that answers the call from stakeholders - from airlines to passengers - for greater efficiency, by providing an integration of all the various systems in an airport.

To illustrate, whereas almost all large airports would have flight information display systems, baggage information display systems, gate allocation systems and so forth, through TAMS all these systems are integrated and interconnected with one another. In other words, it becomes easier for those managing the airport to plan and view the entire situation at a single glance thus ensuring a faster and more efficient response.

Furthermore, as mentioned above, KLIA has been the recipient of many international awards and accolades; and this is thanks to its management by MAHB. It has for instance, over the past three years, won the ACI-ASQ Award for Best Airport in the 15-25 million passengers per annum category for three years running from 2005 to 2007; been named the Brand Laureate for Best Brands in Transportation Airports in 2006 and 2007, while the LCCT was given the CAPA Low Cost Airport of the Year Award in 2006.

MAHB has also been recognised in areas that are not within the aeronautical or airport management field as well. For instance, in 2008, Pan Pacific Kuala Lumpur International Airport, which is managed by KL Airport Hotel - a subsidiary of MAHB - received the Best Airport Hotel in Asia Award from Business Asia for the seventh consecutive time. Furthermore, KLIA has also been awarded Green Globe 21 Certification for four consecutive years (2004-2007), thus setting it as the first eco-friendly airport in the Asia Pacific. This is in recognition of its theme "An Airport in the Forest and Forest in the Airport", which sees KLIA play home to 400 species of flora and fauna.

What MAHB has managed to do through KLIA is to transform the airport experience from being that of a mere transit point to being a lifestyle experience in itself. As such, KLIA has become more than just a place where people wait for flights or pass through on the way to the city. For instance through Malaysia Airports (Niaga) or better known as Eraman Malaysia, KLIA also provides a unique shopping and dining experience as passengers and passers-by are able to patronise world-class boutiques and F&B outlets within the confines of the airport. And then there is the aforementioned award-winning Pan Pacific KLIA as well as the Airside Transit Hotel - both of which offer the best in hospitality.

The future for MAHB

At present, around 25 million passengers pass through KLIA a year, while the airport has the capacity to handle up to 100 million passengers per annum. As such, there is still room for expansion. One aspect of KLIA that is worth noting is that its runways - which are 4,000 metres in length and 2,535 metres in width - are able to handle simultaneous take-offs and landings, thus ensuring a shorter waiting time. There are plans to expand the number of these runways to five by 2020.

Furthermore, apart from passenger traffic, KLIA is also able to offer cargo services and the establishment of the Free Commercial Zone is set to cement the airport's reputation in the air cargo transport industry. Another exciting project that is currently in the works is the KLIA Aeropolis, which makes use of a 25,000 acre landbank to turn KLIA into an exciting world-class commercial, tourism, and transportation hub.

In December 2008, the Malaysian Government approved a financial restructuring plan by
Malaysia Airports Holdings Berhad, which freed up capital expenditure and removed non-core services
from its portfolio, thus allowing it to concentrate on the core areas such as airport management.
As such according to Datuk Seri Bashir Ahmad, the Managing Director of MAHB,
MAHB will "emerge a leaner, more focused and financially stronger company with bright outlook
in the future." Judging by their commitment to excellence, we at Technology Business Review,
are certain that 2009 will prove to be a fruitful year for Malaysia Airports Holdings Berhad.