Another aborted Sime Deal: Focus on Business and Stop the Politics
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KLIA East @ Labu ‘shelved’
P Stek | January 30, 2009
The RM1.6 billion KLIA East @ Labu has apparently been shelved following a meeting today between Deputy Prime Minister Najib Abdul Razak and the two key project proponents – budget carrier AirAsia and conglomerate Sime Darby.
According to sources, the Malaysia Airports Holdings Berhad (MAHB) – the operator of Kuala Lumpur International Airport – has instead been given the go-ahead with its original plan to build a new low cost carrier terminal (LCCT) in KLIA. However, AirAsia is believed to have what it wanted – to be consulted with the design of the new LCCT and lower airport charges for the use of the terminal.
AirAsia has long argued for low airport charges to enable the budget carrier slash fares. The discount airline had on Jan 8 launched the bold plan for a dedicated low-cost airport near KLIA in Labu, Negri Sembilan, after expressing frustration over the lack of progress over MAHB’s own LCCT plan. The company cited efficiency, cost savings and the ability to better cater to the needs of its passengers as the main reasons for its move to build its own airport. It also expressed fears that the existing LCCT in Sepang will not be able to handle the 15 million passengers it is expecting by end of this year and up to 27 million by 2014.
The current LCCT can only handle 10 million passengers and this will be increased to 15 million passengers when a new wing opens in two months. AirAsia to send ‘wish list’ to MAHB AirAsia has been waging a war of words with MAHB over high airport charges in the past few years. A source familiar with today’s meeting described the outcome as a ‘win-win’ situation – MAHB will get more revenue from its new LCCT while AirAsia will have low airport charges. It is learnt that AirAsia will submit a ‘wish list’ to MAHB within the next few weeks.
The ‘wish list’ is likely to include a separate runway for the new LCCT to facilitate quick aircraft turnaround. AirAsia is also likely to insist on a low-cost airport design aimed at keeping airport charges to a minimum. The two – low airport charges and fast aircraft turnaround – are said to be crucial to AirAsia’s business model. AirAsia’s KLIA East @ Labu project – to be built on land owned by project partner, Sime Darby – has been criticised by a number of top bloggers, including former prime minister Dr Mahathir Mohamed, since it was made public.
Mahathir has questioned the need for four airports to serve Kuala Lumpur and that KLIA has enough land for four
additional terminals and three runways to handle up to 125 million passengers a year. The project was put in doubt after Najib, who is also finance minister, told reporters last week that while the cabinet had given the green light to AirAsia’s airport, the government had “yet to make any decision” on the matter.
His announcement was contrary to a statement by Transport Minister Ong Tee Keat on December 21, 2008 who said that the government had approved the new airport at Labu.
Government’s reversal
The government’s reversal indicated that state-owned investment arm Khazanah Nasional, which has a majority stake in MAHB, was successful in lobbying Najib in the bid to protect its interests. Prime Minister-in-waiting Najib is expected to express his opposition to the project when the cabinet relook at the controversy at its weekly meeting next week.
When contacted, AirAsia boss Tony Fernandes described today’s meeting as “very positive”. ‘(It’s) a big step forward for the development of AirAsia,” he told Malaysiakini. Also at the one-hour meeting this afternoon, where Fernandes gave a briefing on the ambitious AirAsia project, were Ong and officials from Economic Planning Unit.
When changes were mooted to the Subang facility the rationale for building a completely new Airport at Sepang was that Subang, among other things, had insufficient space for expansion. This it was reasoned would not be the case with Sepang which would have more than sufficient land to see us through to the distant future. Now barely ten years later, after building the LCCT at a ridiculous distance from KLIA our government is considering an equally unfathomable decision for a third terminal not next to KLIA as it ought to be but, I believe, several miles from it.
As with many such decisions by politicians, the real reasons will come out sooner or later but the proposed facility at Labu, (like the LCCT) has “passenger inconvenience” written all over it. The sooner it is scrapped the better. A new Terminal right next to the existing KLIA would be the most sensible option. This was why the Airport was moved from Subang in the first place.
Isa Manteqi - January 30, 2009 at 11:09 pm
Isa Manteqi,
I have never understood what the present government does with its projects. Look at what is happening to all the corridors which Badawi launched throughout the country. They all reflect poor project conception and planning and execution. I am sure that once Badawi is gone from his elevated office, all these projects will disappear and Najib will initiate his own projects to benefit his cronies. That is why UMNO-BN will never change, playing round robin politics and crony capitalism.
Are we still surprised that billions of ringgits have gone to waste because our leaders are only interested in ego boosting and crony based schemes? Sime Darby Group was during my time in 1980s (under Tun Tan Siew Sin and Tun Ismail bin Mohamed Ali) one of the few companies which the politicians could not get their hands on, not until political types, now headed by Musa Hitam as Chairman, were appointed to its Main Board. It does not take long for anyone to know why Sime Darby is today no longer the darling of the Kuala Lumpur Stock Exchange, and institutional investors. —Din Merican
dinobeano - January 31, 2009 at 7:32 pm
The next victim is Kelab Golf Perhidmatan Awam.(KGPA) I understand that the gynaecologist who brought KGPA into this world is on the right side.
_________
Ramlax,
A financial strapped government will sell its assets, or borrow domestically and/or internationally and then increase taxes. I am not surprised that KGPA is up for sale and Sime Darby which owns the KLGCC will be the favored buyer on synergistic grounds. The question is at what price and will the present member of KGPA benefit from the sale of their club.—Din Merican
Ramlax - January 31, 2009 at 9:30 pm
I’m not flying home anytime soon. So where is the need for another airport??
Mr Bean - January 31, 2009 at 11:24 pm
This one is a little off the topic of this thread. It is about an aircraft in distress seeking to land.
“I really don’t know if the Federal Court will uphold the Shah Alam High Court’s decision to free me. If it does, well and good. But…” RPK
Abang Aki can be relied on to interpret the law narrowly and give it a narrow construction. Either that or he’s too busy looking up his PA’s skirts to notice the swinging of the political pendulum.
But then there’s the smart ass lawyer lurking somewhere in abang Aki (that I used to know) that has not completely gone away! This smart ass lawyer may find it in his interest and of that of his master to then rule the trial judge has erred in fact and not in law, and frees RPK.
Ordinarily a man in RPK’s position would be re-arrested to face a fresh trial.
A third outcome of the appeal is not inconceivable when the case is remanded for the judge to re-consider. RPK is once again found guilty but this time sentenced to time served and freed. This is what I would do if I were Najib Tun Razak.
Mr Bean - January 31, 2009 at 11:59 pm
Even a first year Marketing student knows that one of the basic tenets of marketing is to “produce what the market wants, not what the producer wants “. It is all about marketability !
Clearly, what the people behind these so called mega projects want is to line their pockets,not giving a damn if it turns out to be just another white elephant to decorate the landscape of boleh land !
ocho-onda - February 1, 2009 at 12:00 am
No Ocho! Supply creates demand.
Mr Bean - February 1, 2009 at 12:19 am
Mr.Bean,
I beg to differ. It’s the other way round!
DEMAND necessitates supply ! If there is no demand for drugs you think the drug suppliers will still be in business !?!
___________
In a free market, supply equals demand. Demand means demand based on customer needs. No producer can ignore that the customer with purchasing power is important. Effective demand necessities supply as a general rule. —Din Merican
ocho-onda - February 1, 2009 at 2:01 am
Ocha,
When we were studying first year economics, we were told of the forces of supply and demand, and that the equilibrium price would be the point when demand meets supply. We devoted countless hours studying the effect of changes in the demand and supply for a certain unit of a certain product etc and how prices would move along the supply and demand curves.
But if a product is not in demand, supply would be zero?? Now that’s a theory you would like to explore a little bit more.
Simple example. Take Viagra today. Is it a case solely of demand creating supply? Think again. A man visits a prostitute and wants his money’s worth. He calculates units of satisfaction in terms of how long he would last for every dollar he spends i.e. before he goes shall we say ‘lifeless’.
Insufficient study has been devoted to this other type of consumer who says to himself, “Well, now that I’m erect, let’s see what I can do with it”. Try telling him that it is demand that creates supply!
Din Merican and I grew up when steroids were yet to be discovered and their effects understood. Ali was not around yet. Now that Ali is around, we would like to take him wherever we go. Not that we need to but we want to see what he can do for us. What are friends for??
Having said that, the study of marketing is different from the study of economics. In marketing it is true that you only market a product if there is a market for it.
Mr Bean - February 1, 2009 at 3:31 am
[...] Another aborted Sime Deal: Focus on Business and Stop the Politics … [...]
Rantings and Ramblings From All Around.. » Blog Archive » Media: Whoi Owner Stages Surprise Layoffs For 10 in Texas | Peoria … - February 1, 2009 at 4:29 am
After doing some readings about the history of aviation in Japan, especially regarding Narita and Kansai, I realise that the decision to build KLIA is a good one. With the capacity we see in KLIA (both MTB and LCCT) today, we will be in big trouble if we still use Subang including aviation risk and pollution issues. Isa Manteqi, can you show me which part of land at Subang Airport where we can built a second runaway? if we still use Subang today Air Asia will be the first who lobby for a new airport.
KLIA east indeed will not solve the capacity issue but will create nightmares to connectivity. It is not a win-win solution. I use LCCT and MTB regularly even both at the same time twice. I know Labu will create problems rather than solution.
___________
They are after making money, the faster the better, for vested interests. The public interest is not their concern. AirAsia is looking for cheap deal because they are a low cost carrier. —Din Merican
nasim - February 1, 2009 at 9:45 am
[...] Another aborted Sime Deal: Focus on Business and Stop the Politics … [...]
UFOs at Obama’s Inauguration | IslamLecture - February 1, 2009 at 10:59 am
Bean-san,
Can I put it to you even simpler ? I am still on the marketing topic. If you are Pfitzer, if there is zero demand for Viagra, will you still be investing any more capital to supply(produce) or even to market Viagra ?
Let me take it a step further. Pfitzer has been doing phenomenonaly well with their product Viagra. The demand curve has shot through the wall chart and they cannot keep up with the supply because there are a lot of D.O.M’s around.
But, of late, (based on the last six months’ world sales report) they noticed that their sales has been been plummeting at an alarming rate. So the C.E.O. called for some serious brainstorming and discovered the the massive drop in sales is due to :-
1) their competitor has entered a more superior but much cheaper version of Viagra into the market, to cater for both the wealthy and the poor segments of market.
2)another competitor, with the latest super technology has marketed a new, safe and painless medical procedure using implants that will not only correct penile dysfunction but make spontaneous (24/7) erection possible !
The above two developments (1) & (2) made the D.O.M’s all over the world very happy , for the poor as well as the rich – the poor fella can at last get the chance to experience heaven on earth a while longer, whereas,with a super implant,for the rich fella ,it means never ever having to take another blue pill forever and he can throw away his year’s supply !
But more bad news for Pfitzer because they realized that there is going to be an over supply of Viagra in the market, world wide , not so much as due to the sharp declining demand but because they cannot halt production because their production is based on a world wide, one year projected sales volume.
So, six months down the tube, because of the inadvertent over supply and the drop in demand for their once top earning product, Pfitzer has no choice but to lower its selling price, just to break even their loss.
If you are the C.E.O of Pfitzer,staring at the latest performance report that shows a forecast of further diminishing demand for Viagra, what will you do to keep your job, Bean-san ? Continue with the supply or discontinue with the supply ?
ocho-onda - February 1, 2009 at 2:04 pm
“. Effective demand necessities supply as a general rule.” —Din Merican
Are you positive it’s not the other way round – supply creates demand ! ?!
ocho-onda - February 1, 2009 at 2:50 pm
When we are in a crappy situation where you have people who decides to built an airport whenever and wherever they like regardless if there is a demand, effective or otherwise, for it and most probably without even conducting a feasibility research first, we are not exactly discussing about the free market, are we ?
ocho-onda - February 1, 2009 at 3:14 pm
The advent of sovereign back funds is one of the main reason for the global financial crisis. The availability of cheap funds(low interest rates) coupled with the banks given the goahead to create money well beyond the eight to two ratio of deposits has resulted in the availability of cheap fund in large quantities.
Bukit Antarabangsa - February 1, 2009 at 9:58 pm
Mr. Nasim,
I did not say KLIA should not have replaced Subang. What I did say was Sepang was chosen because it was felt that Subang had insufficient land for expansion. Now that we have KLIA with vast amounts of land any new terminal should be built right next to it and not miles away.
Isa Manteqi - February 1, 2009 at 10:50 pm
Not worth thinking whether the project is viable or not. The crux of the matter here is that those parties involved have always thought that they are so powerful that they can do whatever they like and can get away with it. Therefore, we should ask ourselves siapa ‘kuasa kuasa’ di belakang Air Asia dan Sime Darby. These are the real ‘petualang2′ yang benar2 bertanggong jawab.
Regards
ariffdanial - February 2, 2009 at 2:12 am
Ocha-san
What’s DOM?? Dom Perignon champagne?? I sent a bottle plus caviar to Din Merican on his wedding night. Hope FedX got the address right.
Mr Bean - February 2, 2009 at 6:50 am
Bean-san,
You must either be overly modest or you must have been away at the other side of the big pond for too long,mate ! D.O.M is a Malaysian colloquial term which any seasoned player worth his/her salt must know.
It was used not in any derogatory fashion but to divulge its meaning will defeat its humorous effect !
In any case, knowing what D.O.M means does not make one a seasoned player or a D.O.M. There is no merit nor guilt by association, like. Have a good one. Cheers.
ocho-onda - February 2, 2009 at 10:51 am
“They are after making money, the faster the better, for vested interests. The public interest is not their concern. AirAsia is looking for cheap deal because they are a low cost carrier.” —Din Merican
I quite agree . The whole debate about the necessity for another airport is a smoke screen. At the end of the day, it is all about the vested interests of both Air Asia and MAHB, not the public’s.
And it looks like Air Asia has won the day , in putting the ball at their opponent’s court ,so to speak. This Air Asia chap has to be commended for his negotiation skills and wisdom. Whichever way the decision turns out, benefits Air Asia – building a new airport or extending the present one with its “wish list” included !
I cannot help but wonder why people of Tony Fernandes caliber is at the helm of Air Asia and not MAHB or MAS ? It is sad for me to have to say this but I think it all goes back to our existing national culture that breeds complacency ,mediocrity and incompetency.
When I was living in Singapore at the time when SIA was their national pride , the Singa – pura -ens used to make fun of MAS which to them was “mana ada system” but they were not so boastful anymore wnen I pointed to them that the reason SIA was doing well was because SIA then,was run by MALAYSIAN “rejects”!
ocho-onda - February 2, 2009 at 11:30 am
KLIA was planned to handle 120 million passengers a year when expanded and at its peak have five runways. True or False.
Bukit Antarabangsa - February 2, 2009 at 8:36 pm