Tony Fernandes Versus Malaysia Airports on KLIA2 Cost

November 30, 2011

Tony Fernandes Versus Malaysia Airports on KLIA2 Cost

A leading local entrepreneur (left) and one of the country’s top GLCs are now locked in a face-off over the ballooning cost of the new low-cost carrier terminal (KLIA2) that could threaten Malaysia’s ambitions to be a regional transport hub.

Also at stake is whether the bad blood brewing between the two parties could affect the overseas growth of both Malaysia Airports Holdings Berhad (MAHB) and one of its biggest customers and what is now Asia’s fourth-largest airline, AirAsia.

AirAsia CEO Tan Sri Tony Fernandes yesterday rubbished MAHB’s justifications for the doubling of the cost of KLIA2 from the original estimate of RM2 billion in 2009 to RM3.9 billion currently.

He said on Twitter that increasing the terminal capacity from 30 million to 45 million passengers made little sense as it would make it larger than “the whole of Singapore’s Changi Airport” and suggested that the cost would likely inflate even further.

“American Airlines just gone into bankruptcy. And Malaysian Airports spend 3.9 billion. I’m sure that’s not the final figure,” he tweeted, referring to the news that the US airlines’ parent company — AMR Corp — filed for bankruptcy yesterday.

MAHB maintains, however, that it needs to plan for future capacity as other airports are doing and expects KLIA2 traffic to hit 30 million as early as 2017. A check on Changi Airports International’s website also shows that Changi Airport has a capacity of about 70 million.

The price-sensitive airline magnate also told The Malaysian Insider that he doubted MAHBmanaging director Tan Sri Bashir Ahmad’s assurances yesterday that the increased cost will not result in higher passenger fees and other airport related charges, adding that he lost faith in the airport operator after it allegedly failed to live up to a previous “guarantee” to not increase in airport fees.

“I am very disappointed in MAHB. They guaranteed no increases even at the present terminal,” he said via text message, referring to the fact that MAHB recently started charging an extra RM7 per international passenger at the existing low cost carrier terminal (LCCT).

Bashir had pointed out yesterday that the airport charges and fees were regulated by the government and said that the fees for KLIA2 when it opens for business in April 2013 would be the same as that of the LCCT, at least until the next government review.

The MAHB managing director, whose contract reportedly ends in June next year, also touched a nerve when he announced yesterday that 80 aerobridges will be installed at KLIA2 despite much lobbying by Fernandes to omit the facility to help keep down costs. Bashir said that aerobridges would help the elderly, infirm and others who suffer restricted movement and said that the average extra cost per passenger was a negligible 25 sen.

Fernandes, however, seized on MAHB’s apparent defiance as an example of a breakdown in private-public co-operation.“Look across the Causeway and look at Singapore,” he said. “They listen to their airlines. Their budget terminal has no aerobridges.”

He also noted on Twitter that his flight to Boston, US where he is meeting investors also did not utilise an aerobridge. “Came off US Airways on steps just like AirAsia. Can’t believe how Malaysian Airports gets away. Worst run Malaysian company. Full of empty promises,” he tweeted.

Some MAHB executive, however, expressed private fears that the public spat between the two entities could harm the GLC’s image abroad where it is trying to expand its airport business.

Fernandes has built his business around keeping costs down and has often complained that the claimed lack of responsiveness of MAHB could threaten to derail AirAsia’s expansion plans to become the second largest carrier in Asia after Japan Airlines.

With AirAsia expected to be the largest budget airline flying out of KLIA2 by far, Fernandes’ response that he will not use the aerobridges despite Bashir’s public plea for support means this is a stalemate that could determine if KLIA2 takes off or simply crashes and burns.

7 thoughts on “Tony Fernandes Versus Malaysia Airports on KLIA2 Cost

  1. There may where a clash of personalities, but that aside, Malaysia Airports must explain why the cost of building KLIA2 has risen from rm2.0 billion to rm3.9 billion. With variation orders likely in a project of this size,and given the rising cost of steel and cement and other materials one cannot rule out that the final construction cost will rise further. Tony may be perceived as arrogant but in this instance, he is right to ask for some explanation since AirAsia is the anchor tenant of KLIA2. –Din Merican

  2. MAHB definitely needs to explain the cost increase. In all probability, being a GLC, there could be hidden political hands trying to make money out of the project – typical Malaysia style.

    As for TF, his arrogance cannot be condoned. Can’t blame MAHB considering Air Asia’s arm twist approach in dealing with MAHB since day one – not Malaysian style.

  3. Er.., how much does AA owe MAHB at the moment?
    Perhaps, the MD, MAHB needs the payment for his KPI etc and thus justify his mega-bonus. TF can eat crow, as far as they’re concerned – and there is a real possibility of that happening soon. This altercation is not good for anyone’s health.

    Once you go into the subject of Malaysian GLCs, “magick” rules and alchemy is the law and golden immortality the aim. Since i’m not of the avian species, all i’m concerned about is being able to fly and perhaps not walk 1 mile before i reach the taxi. Is that so difficult?

  4. It looks to me like KLIA2 was simply treated as more and much deeper opportunity for “Leakage”. It would be interesting to find out who the principle contractors are.

  5. Do we need a KLIA 2 what with all those idle gates in the main terminal building? How about just deveoping Terminal D across from Terminal C? The infra ar already there, just extend the toy train.
    The smaller gates in the main terminal were designed for smaller aircraft such as those operated by Air Asia. The government need to put their foot down and insist that Air Asia use these terminal instead of the “horse barn” as described by TF. At the horse barn people walk everywhere including on the tarmac. It’s an accident waiting to happen.

  6. TS Bashir has a lot to explain as that’s a lot of money at stake. I hope the mounting pressure from TF and Co. makes MAHB reconsider their plan, and make sure this KLIA2 is not another gigantic project bound for failure

    In the 1st place, I thought we never should have another airport. KLIA1 and LCCT isn’t enough yet hey!

  7. First he doesn’t want to use the aerobridge, then he wants his own LCCT or airport, wonder what he wants next? His own airport by his front door?

    No aerobridge but AA still have to pay for buses in some airports. You know why AA is cheap because they fly you halfway and make you walk halfway, bring your own makan and next wash your own toilet.

    The next innovative thing from AA is if no seats available on a flight, you can still fly but you have to stand just like on a bus.

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