business

MAHB at "very end" of finalising operating agreement with government

KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) is at the "very end" of finalising its new operating agreement (OA) with the government, said group managing director Datuk Iskandar Mizal Mahmood.

The OA sets out the terms and conditions of MAHB's concession to operate 39 of Malaysia's airports.

The current OA was signed in 2009 and was drafted to compensate MAHB as an airport operator but not as an airport infrastructure developer.

"We are at the very end of finalising the OA as well as the land lease agreement. As of now, I can only make a general statement on the matter, which is that we certainly hope that the new OA will be able to provide us with an upside to the shareholders," Iskandar told a media briefing after MAHB's 23rd annual general meeting (AGM) today.

Analysts are expecting the yet-to-be-signed OA to be an impetus as a re-rating catalyst for MAHB.

They said the government might agree to improved terms for the revision to the current OA, including the possibility of lower user fees, which are a cost item for MAHB.

"The finalisation of MAHB's new OA, initially targeted to be signed by end-2020, has been pushed back further as the Malaysian Aviation Commission is currently reviewing proposed changes to the group's tariff structure.

"The exercise is expected to be concluded in mid-2022," one of them said.

Commenting on the group's business, Iskandar said MAHB's performance for the financial year (FY21) was mainly driven by cost efficiency and improvement in Istanbul Sabiha Gokcen International Airport's (SAW) operations that led to passenger recovery by recording 70.6 per cent of pre-Covid traffic.

He said the group had implemented cost efficiency measures that helped retain its AAA and A3 credit ratings by RAM Holdings Bhd and Moody's despite the challenges posed by the pandemic.  "Various mission critical initiatives such as the replacement of aging assets are also taking shape as planned to ensure we continue to provide safe, seamless, and world-class experiences at our airports moving forward," he said.

Iskandar said MAHB's growth trajectory was on the horizon as the airport operator was focusing on ensuring profitability.

He said the group was pivoting to an enterprising mindset, to secure new revenue streams and further growth opportunities.

"This will be done via three main pillars namely bringing back international passengers, rejuvenating commercial and retail business as well as accelerating off-terminal development," he added.

MAHB's net loss narrowed in the first quarter (Q1) ended March 31, 2022, to RM104.76 million compared to RM221.3 million in the same quarter last year, supported by improved passenger volume.

It registered revenue of RM570.85 million, up 69.4 per cent against RM336.91 million a year ago, in tandem with the significant increase in passenger volumes, driven by the further easing of travel restrictions and quarantines, the reopening of borders through Vaccinated Travel Lanes arrangements by several countries, and the gradual transition to an endemic phase.

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