KLIA2 set to significantly boost Malaysia’s aviation sector

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KLIA2 will ride on this dynamic and booming budget travel market, leveraging on the success of its chief tenant, the AirAsia Group, which has been acknowledged as the world’s best LCC for five years running. (Photo credit: Auswandern Malaysia )

KLIA2 will ride on this dynamic and booming budget travel market, leveraging on the success of its chief tenant, the AirAsia Group, which has been acknowledged as the world’s best LCC for five years running. (Photo credit: Auswandern Malaysia )

By Zhen M

The Kuala Lumpur International Airport 2 (KLIA2), initially envisaged to replace the overstretched and congested KLIA-LCCT (Low-Cost Carrier Terminal), is shedding its LCCT label. With its facilities upgraded to provide business class services as well, it is now slated to be Malaysia’s first hybrid airport, catering not just to LCCs but also to full service carriers (FSCs).

After its target completion date has been pushed back no less than five times and its costs more than doubled from the original RM1.9 billion budget amidst a heated blame game, the Transport Ministry has finally put a firm foot down. It has mandated that the KLIA2 begin operations on 2nd May 2014 and that its costs not exceed RM4 billion.

Airport operator Malaysia Airports Holdings Bhd (MAHB) maintains that there had been no “cost overun” as the cost hike was due to an increase in the scope of the project to cater to stakeholders’ requests, and from AirAsia for the most parts.

Indeed, the airport’s scope and facilities now dwarf its original blueprint. Changes include various substantial increases – the terminal floor space was increased from 150,000sqm to 257,000sqm; land area expanded from 4.84 million square meters to 11.19 million square meters; runway lengthened from 2.5km to 4km; the number of boarding gates increased from 55 to 68; building structure increased from two to nine storeys; and the elevated road lengthened from 8km to 15km. The airport’s baggage handling system was also upgraded from semi-automated to fully-automated.

The KLIA2, in complementing the country’s flagship airport KLIA-Main Terminal Building (MTB) being located a mere 1.2km away (or 10km by car), will significantly boost Malaysia’s aviation sector and play a pivotal role in lifting Malaysia’s appeal as a destination and/or transit hub, especially for LCCs. After all, KLIA is strategically situated within a high population catchment area which includes four of the strongest global growth markets: India, China, Thailand and Indonesia. Over a quarter of the world’s population lives within a four-hour flight radius of KLIA.

While LCC penetration remains highest in Europe and North America, Asia is experiencing the strongest growth rates. Asia saw the highest growth in terms of LCC market share in 2012, increasing 2.1 percentage points to 18.6%. While these numbers remain significantly lower than the 38.0% penetration seen in Europe and 30.2% in North America, the growth of budget airlines in Asia is clear.

KLIA2 will ride on this dynamic and booming budget travel market, leveraging on the success of its chief tenant, the AirAsia Group, which has been acknowledged as the world’s best LCC for five years running.

Besides improving air traffic in KLIA, KLIA2 also offers a substantially enhanced comfort level and way better connectivity compared to KLIA-LCCT, attractive factors to travellers.

Central to KLIA2’s enhanced connectivity is the extension of the high-speed Express Rail Link (ERL) service to the terminal (ERL does not connect to LCCT), which will cut the journey time between KLIA-MTB and KLIA2 to merely three minutes while the journey between KLIA and Sentral KL would take 33 minutes via the KLIA Ekspres and 39 minutes via KLIA Transit.

RHB Research regional transport analyst Ahmad Maghfur Usman notes that one of the reason why travellers are reluctant to transit at LCCT for long haul connecting flights included the inconvenience in using the airport. “This will change with KLIA2. Over the longer run, the upcoming KLIA aeropolis (airport city) will also add to this appeal. But for the moment, we still lack Thailand’s tourism appeal and Singapore’s business appeal. Malaysia will have to play its cards right well to boost tourist arrival numbers,” he opines.

Development of the aeropolis could kickstart as early as 2014. It would include a haj complex and factory outlets while mooted developments include a golf course, resort hotels, cinemas, and maybe even Disneyland, says Ahmad.

Despite the global economic slowdown, global air passenger traffic rose 3.9% in 2012, according to International Air Transport Association (IATA), with stronger among Asia-Pacific carriers at 5.2% in 2012, up from 4% growth in 2011. KLIA-LCCT saw a strong pax growth of 9.9%. In 1Q 2013, KLIA saw a pax growth of 11.1% – MTB growing at 15.3% and LCCT at 6.8% – suggesting that KLIA is poised for stronger prospects ahead.

KLIA2, when it begins operations, is expected to accelerate that growth.

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