What new initiatives is Malaysia Airports Holdings Berhad (MAHB) currently undertaking?
AHMAD: We are focusing on two initiatives that we started about a year and a half ago. The first one is the construction of Kuala Lumpur International Airport 2 (KLIA2). The present terminal that we have is getting crowded and we decided 3 years ago that we should build a new terminal. Secondly, we are updating Penang Airport. Penang Airport was starting to get crowded as well and we decided to upgrade it for this reason.
What challenges does Malaysiaâ€™s aviation industry face?
AHMAD: In general, the aviation industry faces many challenges including fuel price increases and liberalization of traffic rights. The industry has become very competitive and as a result things have become more challenging. The airports depend on the airlines to be profitable which makes it important for us to be able to provide them the kind of capacity that they need to grow. We are very much connected with the aviation industry in general. From our point of view, it is important for us to meet the challenge of providing the capacity for the airlines as they grow because if we donâ€™t provide the capacity, then the airlines cannot grow. The fact that we are building KLIA2, upgrading Penang Airport, and continually upgrading all of our terminals at our 39 airports, shows that we are trying to meet that challenge of providing capacity for the airlines to grow because if the airlines don't grow then we will have a problem.
How much are the efforts to increase capacity part of a larger effort to make Malaysia more of an international hub in the Asia-Pacific region? What else are you working on to achieve this end?
AHMAD: To a certain extent, if you look at just KLIA, we are already an international hub. This year, we will have almost 40m passengers at KLIA, which is not so far behind some of the other airports. An advantage for us is the fact that we have a huge potential in tourism that is still untapped and our tourism numbers are growing. As these numbers grow, our numbers will go up at the airports as well and, as a result, we will become a much bigger airport. In the year 2009, when all the other airports in the region were seeing a decrease in traffic, we were still growing. We need to increase our capacity in order for the overall numbers to grow because as we've seen, when the airlines increase their capacity there are many additional passengers that come in as a result. Many of the additional passengers coming in are from the Middle East, China, and Indonesia. If we want to remain competitive and be a hub in this region, we must ensure that we continue to have the capacity for the airlines to bring in the passengers. We have plans to build a second satellite at the main terminal, which will allow for growth at the main terminal. When KLIA2 is built, it will be able to handle 45m passengers. The new terminal will be purely for low-cost carriers and it's going to be the biggest low-cost hub in the world.
What competitive advantages can you offer airlines for increasing routes and operations in Malaysia?
AHMAD: We offer a very friendly environment to the airlines. The government practices open skies. I don't think there is any problem getting rights coming into Malaysia. Airlines have freedom to come into Malaysia. Additionally, we provide the lowest cost-base of operations for any airline. Our charges are among the lowest in the world. We also give incentives for airlines coming in and providing growth. Lastly, this is still a growing economy for us. Tourism is growing, more and more people are coming in, the government is doing many things to promote Malaysia, and we believe that these factors should be taken into consideration for any airline that wants to operate in Malaysia.
In addition to the 39 airports within Malaysia, MAHB manages facilities in both India and Turkey. What is the scope of these operations? What are your international growth and development plans?
AHMAD: Currently, we handle 39 airports in Malaysia. Some of them are very small airports and they range in size all the way up to our main terminal at KLIA. Managing all of these airports has given us experience with big and small airports. Therefore, we have ventured overseas to share our expertise. Right now, we have 4 airports: Hyderabad, Delhi, Male and Istanbul. Working in these locations has given us experience in terms of getting involved with overseas airports. When we say that we manage overseas airports, we do not necessarily manage 100%. There are people in those countries that run those airports by themselves for the most part, but we come and facilitate with certain management expertise and IT development. We facilitate the operation of their airports in certain areas where we believe that we have certain expertise that they may not have. For our service, we take a small equity. We believe that this model has worked very well for us. If another proposal comes up for us to help manage another airport in addition to the 4 we already facilitate, we will look at it from a very prudent point of view on a case by case basis. We always thought that maybe 5 or 6 would be just the right number that we could handle. We believe that is still the case for the next couple of years. We have 4 now and we could probably take on another 1 or 2 more.
In 2011, 64 million passengers passed through MAHBâ€™s 39 airports in Malaysia. What are your projections for traffic numbers in 2012 and what are your targets for the upcoming years?
AHMAD: In our original business plan, we said that we would need to reach about 60m as a base figure by 2014. We've already surpassed that number with 68m passengers. I reckon that by next year, we will easily surpass 70m passengers. I think based on our master plan, by 2014 we will easily succeed 70m passengers and that's quite a good number for us to have.
Currently, what is the breakdown in revenue contribution between passenger and cargo? How will this evolve in the future?
AHMAD: We don't earn very much from cargo. We do have aÂ sizableÂ cargo input coming in, but we don't earn very much from it. We do earn a bit from landing and parking, but it is not very substantial. In terms of a proportion, I would say that more than 90% of our revenue comes from the passenger side rather than from the cargo side. It's not that we aren't focusing on cargo; if necessary we give the required facilities for cargo growth. But in terms of revenue, more than 90% of it comes from passengers.
In what ways is the aviation industry taking part in the Governmentâ€™s Economic Transformation Programme (ETP)?
AHMAD: The government has recognized that aviation plays a very important role in terms of trade, mobility, and tourism. Therefore, the government is trying to ensure that our tourism industry remains relevant within the whole of the economy of the country. That is why the government encourages open sky policies with the airlines and encourages MAS (Malaysian Airline Systems) in Asia. The government would like to see our home base carriers expand their capacity and to become well known airlines globally. They expect us to support the capacity so that there's no disruption of people coming in. It's been shown that for every passenger that comes into Malaysia, there is a multiplier effect of 12 times. These factors demonstrate that aviation and tourism play an important role for the country. Everybody in the aviation industry has a role to play because it is on the forefront of the development of the economy.
In our original business plan, we said that we would need to reach about 60m as a base figure by 2014. We've already surpassed that number with 68m passengers. I reckon that by next year, we will easily surpass 70m passengers.
What are your expectations for growth in trade and tourism between the Middle East and Malaysia? How does this impact your bottom line?
AHMAD: Over the last 10 years, we have seen a large influx of tourists coming from the Middle East and this has been very good for us. Currently, practically all of the major airlines from the Middle East are coming into Malaysia, including Gulf Air, Qatar Airways, Oman Air and Saudi Arabian Airlines. Right now is a big time for them to come here for their holidays. These airlines have been increasing their frequency. Emirates now has 3 flights per day into Kuala Lumpur; Qatar Airways has 2 flights per day. Ten years ago there were only 2-3 flights per day coming in from the entire Middle East region. Today, we have about 8-9 flights per day. Much of the traffic is comprised of tourists from the Middle East coming into Malaysia because they find Malaysia to be a good destination for them in terms of food, religion, and vicinity. Another reason for the increase is because of the outbound traffic from Malaysia going to the Middle East and Europe as well. We really haven't had any problems attracting the Middle East carriers to Malaysia and increasing their frequencies.
What sets MAHB apart from other airport holding companies?
AHMAD: We were the first airport in this part of the world to be publicly listed and the 3rd in the world at that point in time. When you are publicly listed, there is a great deal of accountability on the part of the airport. Our accounts are all transparent; we must ensure that we're profitable because there are people investing in our shares and they expect returns, they expect good dividends. There also needs to be a high-level of corporate governance along with transparency. At the end of the day, we have to deliver to the shareholders who invested in us. There's an added responsibility that we have to the shareholders and to the public. For a company that is not publicly listed, that portion of accountability is not there. Being publicly listed, when we hold the annual general meeting, we must answer questions from our shareholders. Fortunately for us, over the last 8-9 years, our profits have been increasing every year and we give out dividends equivalent to 50% of our profit ever year.
If you look at our business plan, we have shown that we have great potential for growth. The very fact that our charges are the lowest in the world gives us an advantage should we be inclined to capitalize on it. We are not doing that right now, but it provides us with a significant potential advantage. Additionally, we have a great deal of land which is an advantage as well. We have our own hotel and our own plantation. Our revenue streams are not purely dependent on the airport's operations. We have other revenue streams that will help us increase our overall revenue. The potential for growth in terms of passenger numbers is there. When we look at our business plan we see the potential for us to become much more profitable and a much bigger company.
How does rapidly advancing technology affect your operations? What are you doing to stay ahead of the curve and remain innovative?
AHMAD: In the aviation industry, technology plays a very important role. As you know the aircraft have a great deal of high technology involved in their operation. There are many rules and regulations for airports to keep up with new technology. Even without rules or regulations in place, it is essential for airports to keep up with the latest technology because passengers expect it. If you look at how passengers are traveling today, you find that technology is at the forefront and this is how passengers want it to be. Passengers want the latest technology when it comes to check-in, bookings, and many other parts of the flying process, and we must ensure that we provide that. For example, whenever the IATA (International Air Transport Association) comes up with an idea to simplify business and they introduce the newest technology that they believe will help to achieve that, we are always the first one to volunteer because we know it will help the passengers. Right now we are working very closely with all of our airline partners in this regard as well. In fact, I would say we want them to move faster. We want to have the technology whereby a passenger can do all of his or her checking in at home, then come to the airport and board the plane hassle free.Â We would also like the passenger to spend some time and do some shopping instead of queuingÂ up for check-in, security screenings, and all of the other procedures that take up too much of their time. We want technology to resolve such matters by simplifying and expediting the process.