Subang Airport takeover will jeopardise aviation hub plan

More damaging than that is it shows the govt can abscond on any agreement it signs, says Nungsari, and not good for Malaysia as an investment destination


MORE parties have come out to oppose the proposed takeover of operations at Lapangan Terbang Sultan Abdul Aziz Shah or Subang Airport by a private company, citing the possible loss of Malaysia’s national aviation industry initiative into a commercial development on the strategic site.

Dr Nungsari Ahmad Radhi, former head of the national aviation regulator, said decisions on Subang Airport must be made within the standing operating agreement (OA) signed between the government and Malaysia Airports Holdings Bhd (MAHB).

The agreement provides MAHB mandate to manage and maintain airports, including Subang Airport, until 2069.

“Failure to do that will undermine investor confidence in MAHB as a publicly listed company whose business model relies on the OA with the government.

“More damaging than that is it shows the government can abscond on any agreement it signs. It is not good for a government that is already suffering from other competency and integrity issues, and not good for Malaysia as an investment destination,” he told The Malaysian Reserve (TMR).

Nungsari questioned the rush to consider the proposal while Parliament is suspended and a state of Emergency is active.

He said any new decision should consider how it will fit in the national transport network, given that the government has committed billions to rail and other land connectivity.

“If at all, there should be a transparent mechanism to determine who and how to do this within the OA,” he said. “Overall, a poor and poorly-governed decision.”

In March, there was a concept paper by a company involved in property development and mall management to enter into a new concession to operate the entire Subang Airport land area until 2092.

The paper sighted by TMR, prepared by an accounting and consulting firm, proposed to develop the area to be a city airport.

The RM3.7 billion proposed investment aims to serve “time-sensitive users” such as business travellers to and from the Klang Valley, cargo and logistics that require quick access to Klang Valley customers and new demographics of users specifically drawn to Subang by the new commercial development planned.

The proposed deal, among others, entailed the company negotiating fair compensation to MAHB and Airod Sdn Bhd for vacating Subang Airport and a portion of 15% of the airport landing charges as a concession fee paid to the government in compensation for the use of the runway.

In return, the company asked, among others, access to MAHB’s records relating to the airport, including agreements with third parties to develop a compensation offer; ability to levy locally set landing and passenger charges as Subang Airport will no longer be part of the MAHB cross-subsidy system; and ability to operate small-capacity passenger jet aircraft of up to 140 seats to focus on point to point traffic across East Malaysia, Asean and Southern China.

The development plan included a brand new 7.5 million per annum passenger terminal, new modern business aviation (BizAv) centre, medical centre, performance venue, outlet mall, trade centre offices, bonded warehousing for valuables, hotel and meeting facilities, and a convention centre with airfield access.

“The company wants the entire airport, Malaysia Airlines Bhd (MAB) and Airod’s land plots and turn it into a ‘real estate’ play,” a source close to the development told TMR.

On the city airport with jet operations idea, the source said: “This is reversing the government’s decision to move all jets to the Kuala Lumpur International Airport (KLIA) due to environmental and residential community considerations in Subang and space constraints for growth.”

Despite growing opposition, a source told TMR that the private proposal is expected to be tabled in a Cabinet meeting next week.

Asian Business Aviation Association Malaysia Chapter head Aida Ismail said it might not be a very wise decision to let Subang Airport fall into the hands of a private entity “if the main agenda is massive profit-making and not for the industry growth and development”.

She said Singapore and Hong Kong, a leading private jet hub in the region, still have the government in control of their jet terminals.

“A jet terminal hub handles high-net-worth individuals, investors and the who’s who. Their safety and privacy must not be compromised.

“Government can do a lot of things and perform immediate decisions if necessary, unlike a private company who still needs to comply with current regulations,” Aida told TMR.

She questioned the attitude of the private company that intends to take the concession of Subang Airport.

Aida said Subang is specific for business jet operation and its support ecosystem. It would get mixed results from mixed planning.

The private proposal for Subang makes a direct hit on MAHB’s “Subang Airport Regeneration Plan”.

The Subang Airport Regeneration Plan upholds the national agenda to make Subang Airport the “most preferred hub for aerospace and BizAv in Asia Pacific” with the OA and philosophy of airport networks in mind.

It focuses on three areas: Aerospace ecosystem, BizAv and urban community airport.

The total estimated loss calculated based on the remaining concession to 2069 is approximately RM11.9 billion due to the carving out of Subang Airport, according to a document sighted by TMR.

While the proposal to take over Subang Airport operations is roundly criticised, property players see gold in the development of land on the site and its surrounding.

CBRE-WTW group MD Foo Gee Jen said such a city airport proposal would be a catalyst for development, similar to those in Incheon, South Korea, and Istanbul, Turkey.

He said the plan could succeed provided with the right expertise and technology to execute it.

Similarly, CCO & Associates (KL) Sdn Bhd ED Chan Wai Seen said the right infrastructure, incentives and policies must support such a proposal or it risks ending up like a “typical commercial development.