MALAYSIA Airports Holdings Bhd (MAHB), which was given the mandate to oversee the operation, management and maintenance of airports in Malaysia, has come a long way since its corporatisation in 1992.
Today, MAHB has the distinction of being the second largest airport group in the world in terms of passenger capacity, after Spain’s ENAIRE Group.
MAHB operates 39 airports in Malaysia, 40 including Istanbul Sabiha Gokcen Airport. In total, the group handled 110 million passengers this year.
In this first of a two-part interview with A. Jalil Hamid, Lokman Mansor and Cheryl Yvonne Achu, MAHB managing director Datuk Badlisham Ghazali — who was appointed to the post on June 23 last year, a day before klia2 opened — speaks about his plans to take the company to greater heights.
QUESTION: You joined MAHB on June 23 last year. How has it been the last year or so managing the company?
ANSWER: Many things have happened during this period. There was the opening of klia2. Opening a new terminal is a major event for any airport. And then there were the twin tragedies (MH370 and MH17) that happened and other air incidents.
Airports obviously look at passengers but airlines carry the passengers. We are fortunate that we have two large Malaysian flag carriers — Malaysia Airlines and AirAsia — operating out of Malaysia Airports. When anything happens to one of these flight carriers, like we had last year, of course it has an impact. Malaysia Airlines carried approximately 35 per cent of our traffic at that time.
Having said that, as I look back at the numbers, in 2013, we closed at one of the strongest growth ever for a large airport, close to 19 per cent. The growth rate for airports in the region was from 5 to 6 per cent. So, we had exceeded the growth against market for a large airport.
That has a lot to do with Malaysia Airlines joining oneworld (an airline alliance). Of course, AirAsia was also growing, but predominantly, the growth was a result of Malaysia Airlines joining oneworld, which opened up close to 900 destinations.
Post-tragedies, conditions were right to perhaps set the baseline for some normalisation of actual growth rather than break-neck growth like in the past. It’s not as exciting, but it provides for more realistic growth going forward.
This set the tone for how we look at growth in Malaysia Airports and Malaysia. This is what we want to see.
QUESTION: How was growth last year?
ANSWER: From 19 per cent, we ended last year with just above 4 per cent growth.
QUESTION: What about this year?
ANSWER: This year, if you look at our numbers over the last three quarters, it’s trending about 2 per cent. I think growth from this point will be of better value. Unbridled growth always has a reverse connotation.
Why do we want this elasticity? Because we have to forecast what we have at the airport. Of course, we want growth, but if it is not sustainable, then we may over-build or under-build, and that’s not something that we want.
QUESTION: We’ll go back to that point later. For next year, what do you think will drive growth in terms of revenue, traffic?
ANSWER: Well, the work that we’ve done with the government, including the Tourism Ministry, in attracting other airlines is important. Going forward to next year, what we can look forward to is economic development. We watch GDP very carefully. GDP is a driver of passengers, leisure or business. And it’s not just about our country but other regions, too. The more economies are integrated, the more there is a need to travel, because all the other agencies in other parts of the world are going to promote, whether it is a trade mission, tourism promotion or an inbound investment mission.
Specifically to Malaysia, obviously we are most excited by the prime minister’s announcement (in the 2016 Budget) about e-visas for China and India (by mid-2016). The earlier we start, the better. Other countries like Thailand and Indonesia have already done that. We’ve seen an influx of traffic into their countries.
The industry estimates that every year, there are 100 million new flying passengers.
There’s enough to go around. So, we just want our fair share going into next year.
QUESTION: Is there enough capacity for Malaysia-China, China-Malaysia travel?
ANSWER: There is always requirement for more, not only in frequencies to existing destinations but opening up new destinations. One of the things we’ve done with the government is to see how we can make Langkawi attractive. AirAsia has announced direct flights from Guangzhou to Langkawi, for example.
Frequencies are also important. When we travel, we want choices, for example, what time do we want to leave. If the plane is full for the 7 o’clock flight we wanted, we should have an option to take the 8 o’clock flight. In the past, when there was only one flight a day, if you missed that flight, then you had to change the whole plan. If you are a leisure traveller, or with a group of four, 10 or 20, it makes the options limited.
QUESTION: To transform KLIA into a hub, connectivity is important as well? It doesn’t matter where the passenger is coming from or where they’re going to.
ANSWER: For that to happen, there are many issues. One of them is between airlines. Airlines would look at profitability of their destinations and onwards. To some degree, the ringgit depreciation helps because our charges are still in ringgit; converted to US dollar, it’s cheaper. But we are already very affordable in charges. What will drive in traffic to Malaysia is the capacity. Whether it’s KLIA or klia2 and especially the runway, and what the government is implementing in upgrading in the ATC (air traffic control). They are going to move here from Subang (by 2018 or 2019). That’s just the physical side. More important is the systems upgrade.
Airspace management is important. Our configuration on runways allow us to be more independent in terms of take-off and landing. That is attractive because they know they can get the time slots that they want. And that’s very important to airlines. It’s a matter of sequencing take-off and landing and airspace management. Our physical infrastructure is already there: the three runaways.
When you look at whether there are enough bays at KLIA, we have both. klia2 is not a low-cost terminal, it was built for low-cost carriers. We allow any carrier to move left or right if that’s what they want. Bays is not an issue, the runway is not an issue. What we want is to make sure the airspace management is super efficient.
Today, we do about 78 aircraft movements an hour. I think if the Department Civil Aviation system is upgraded, we will have better airspace management at KLIA and can go up to 110 aircraft movements per hour. That’s a lot.
QUESTION: What is your business plan for next year, apart from improving the capacity and making KUL a livelier hub?
ANSWER: What we want to see happen is making KLIA a hub. KLIA and klia2 are not airports, they are terminals. Technically, they are Terminal 1 and Terminal 2. You want to make sure they are able to link not physically, but link as terminals. That gives passengers and airlines options. If we facilitate the connections of these terminals, then airlines can say: ‘I can start to consider inter-lining with other airlines.’ ‘You come in my airline… it’s not code share … but the passengers are able to transfer to another airline seamlessly.’ Now if you take a low-cost carrier, you have to exit and then re-enter.
The thing about inter-lining is that it’s not going to be us ... it’s got to be between the airlines. The airlines must agree, because systems have to be put in the back-end to allow the transfers, so that we recognise that bag and that customer and then we transfer you across. But that agreement must be done between the airlines.
Our job is to make sure that we facilitate this. Would airlines do it? Yes. Depending on which airlines and which time frame you are at, but all airlines want that opportunity to grow their customer base and options.
QUESTION: How come Heathrow or Changi can do it and we can’t? Is it because there is no initiative between the airlines?
ANSWER: Actually, we, Malaysia Airports, can do it today. We can provide the infrastructure. But whether the airlines want it (is another thing). Now they see other airlines coming in an taking away the opportunities. So that may facilitate the process.
QUESTION: How do you think MAHB will do this year?
ANSWER: I think we are always profitable. It’s a matter of the quantum. Obviously, at the profit line, the shareholders know that an airport takes a while to digest investments, and we made a big one with klia2. But that is for the long-term sustainability for any airport.
On the group level, the good news is our asset overseas. Malaysia Airports as a group has always gone overseas, but the contribution has always been small until this year, when we acquired 100 per cent and consolidated the airport in Istanbul (Sabiha Gokcen International Airport, or ISG).
The timing was just nice, which is fortunate. The airport was ready. We bought over the partners with shareholders funds. It is now providing returns. There’s fantastic growth in Istanbul. By the way, this is the second airport. The main airport is called Ataturk. Ours is considered the second airport in Istanbul and is on the Asian side. They are building a big new airport up north near the Black Sea. That would replace the Ataturk airport, which is landlocked, located downtown and can no longer be expanded. That would probably be ready by 2019 or 2020.
Even after it comes on stream, it helps us because a lot of the economic growth is happening on the Asian side. Turkey has already committed multiple infrastructures to connect the Asian side and the European side. There will be a high-speed rail, the third bridge, underground and metro. All that helps us.
And it’s not as though we are going to cannibalise each other because the growth rate is double digit. Now the growth rate is already at 16 per cent for our airport. The government has announced a second runway at Sabiha Gokcen, which means we may have added capacity. This is the first full-year contribution from the airport. The concession is until 2034.
QUESTION: Going forward, how much is your overseas market going to contribute to your topline?
ANSWER: The stakeholders have always wanted us to be global champions. All government-linked companies have to look at moving their competencies outside of Malaysia, so we’ve done that for many years. We own assets in India. We used to run Kazakhstan airport, Maldives airport, we’ve done work in Doha. As a ratio, we obviously want to be as capable as possible. We don’t want to do it just for numbers sake. But the stakeholders want us to present to them what are viable assets that we should look at moving forward, whether they are greenfield or even brownfield airports. Greenfield means you have to invest for a long period. Brownfield maybe it’s ready, we can enhance (it) and get income.
QUESTION: Sabiha Gokcen is a brownfield airport?
ANSWER: Actually it’s a greenfield. Because we had to build a new terminal. They had an old terminal and it just cost too much to demolish and rebuild (it), so we built a new terminal next to it.
When we looked at the asset nine years ago, they were only doing less than a million passengers. It was owned by the Defence Ministry. It wasn’t a military airfield. Now that we have taken over, the traffic has increased to about 26 million to 27 million.
QUESTION: How many airlines are operating there?
ANSWER: There are 22 airlines operating at ISG. It’s dominated by two Turkish flight carriers: Turkish Airlines and Pegasus Airlines.
QUESTION: When the new airport opens at the Black Sea side, are they going to close the old airport in Istanbul?
ANSWER: That is the announcement they made. They want the Black Sea airport to be the main hub. We don’t see that as a major threat. It’s more complimentary because even today, with the two airports, there is not enough capacity into Turkey. Both Turkish flight carriers have got an impressive growth strategy, and the time zone is desirable for airlines. Some carriers who want to use the time belt, either the other airports are full or they may not get the best deal or the best time. So they look at what is available and Turkey is nicely positioned because of the time zone as well as the infrastructure that has been committed. So yes, they assess the country risk and all that, but Turkey has always been a vibrant trade route and the neighbours — Iraq and Syria — are always their neighbours. You can’t do anything about it.
QUESTION: We also heard that Turkish Airlines is adding frequency to KL?
ANSWER: They are moving from seven times to 10 times a week. We hope they will go up to twice daily and that makes 14 times a week. Emirates is doing four times daily. They will bring back the A380 to KUL. Other airlines have increased, too. Qatar Airways has increased its frequency to KUL to 24 weekly flights, four daily. China Southern is 10 times weekly. Oman Air is already daily. Jetstar Asia is four times weekly. The rest are smaller. Bangkok Airways is four times weekly. Xiamen Airlines is three times weekly. Saudi Arabian Airlines is three times weekly.
British Airways is already daily. All Nippon Airways is daily, and these all came this year. AirAsia X is now 35 times weekly to their destinations. Air China is four times weekly. The new airlines we welcome — co-owned Shanghai and Hainan airlines (four times weekly). These are the frequencies that we welcomed back. As you can see, not all of them are new airlines. Traffic intra-Asia is big.
QUESTION: Are you in talks with other airlines to encourage them to come?
ANSWER: Yes, of course. Every year, we participate in a global conference called Routes. That’s where airlines talk about scheduling. They like to talk to airports about routes and timing, provided they have traffic rights. We still have capacity.
QUESTION: When you were offered this job, did you have any hesitance, given all that you’ve heard about the so-called issues, problems and challenges faced by MAHB?
ANSWER: Any new job needs to be thought through. Of course, I read in the media and public space about what was happening. But what comforted me is that MAHB is not a new company that suddenly decided to enter the airport business. It started from DCA (Department of Civil Aviation) to being corporatised. These people run airports. They know it.
They’ve been involved in international airport construction. They’ve designed, built and operationalised other airports. Even in the smaller airports around here as well, our input is critical. There are people who the industry looks up to, and Malaysia is one of them. And because they came out from the DCA government days, these are not business people. These are operational, engineering people who care about what they do. That comforted me when I took on this job. Other than that, actually, it’s an exciting job, too.
QUESTION: Why?
ANSWER: This is not only about maintaining the company. The opportunity to expand the company is great. Aeropolis is one thing. Overseas, our standing in the international committee for services is high. Not many airports have that experience. We are one of them.
Are we bigger and better than some of these global companies? Maybe not. But are we good, to get Sabiha Gocken or other airports that we’ve managed? Yes.
Are we being courted by other airports to come in as either investors or operators? Yes.
Why? Because we have that experience. Our experience is not only in managing a large airport, but also because we know how to handle bad news, how to handle governments, mid-size airports, DCA and even how to handle STOLports (short take-off and landing). Most of them run only one airport. There are opportunities out there that they said: ‘You are the only one that can do this’.
QUESTION: This success story of MAHB needs to be amplified.
ANSWER: The other thing I discovered here is that the previous management had committed to human capital. So, a lot of the airport managers’ training is done here, because we are committed to it. We conduct for our people an airport managers module here, which is coming from ICAO (International Civil Aviation Organisation). ICAO also now recognises this is the centre, so their airport people do training here. Our facilities are being used for training; we open them up. In the Airports Council International (ACI), we help other airports that don’t have all the resources, to help in operationalisation audit issues. We sent our people on a pro-bono basis.
QUESTION: Is your lack of airline or airport business a setback for you?
ANSWER: Well, I’ve been asked that question many times. I’m here not to run the airport. I’m here to run the company. On that basis, that is why I was comfortable to say yes. If you want me to run the airport, I’m not that guy. If you want me to run a company, yes, I can. Of course, below me are the people who know how to run an airport and I know how to make them better.