Monday, January 12, 2009

Don't Ruin The Goodwill

Dear Tony,

To be fair, let's hear Tony Fernandes side... but after reading what he said, it seems he is intent on bulldozing his way through, regardless of the Masterplan... if there was a Masterplan, why not wait till its revealed. Tony always huff and puff that Malaysians are not supportive of a strong home grown brand such as AirAsia. Contrary to that belief, Tony, I think the majority of Malaysians love AirAsia for the freedom and choice it has created. The fact that it has parlayed and leverage the brand and operations to be a globally well known LCC for the Asia Pacific region is to be lauded. Just because sometimes the public do not like some of the strategic moves, does not mean that we don't like the company. We all know AirAsia has had its "insiders" promoting the company albeit giving AirAsia an advantage somewhat, but thats a given in a place like Malaysia. You still managed to turn the benefits and advantages positively, which is very good. When you are on a good thing, don't push, the line between acceptable greed and arrogance is a very thin line. Just that most of us think that you have crossed that line with the now simply clumsy, arrogant, unscrupulous, increasingly heartless (pun intended), callous, manipulative, clumsy, ruthless and predatory Sime Darby. There is substantial public goodwill with you Tony and AirAsia, much like the goodwill surrounding Obama, so don't fuck it up!

Business Times: Analysts and industry executives do not think that Malaysia needs two airports located within 10km of each other.

The newly approved airport in Labu is just 10km away from Kuala Lumpur International Airport (KLIA) in Sepang.

"The only way for this concept of two airports to succeed, is to have very efficient high-speed transportation, 24/7, between them," said Datuk Seri Tunku Iskandar Tunku Abdullah, Asean Tourism Association (Aseanta) Intra-Asean committee chairman.

"Otherwise, we can say goodbye to being a major aviation hub, and I can imagine the kind of complaints that travellers will have in not being able to inter-connect efficiently. There will be all kinds of new challenges for the inter-modality of passenger transportation," Tunku Iskandar said.

The ideal situation is for just one airport, with separate terminals and satellite buildings, to cater for the volume of air-travellers, he said.

Tunku Iskandar said the situation is bad enough now with the LCCT being a separate terminal and not well-connected to the main terminal at KLIA.

The situation has led to much inefficiency as inbound tour operators need to spread their resources over two terminals, some 20 minutes away from each other.

The KLIA, now in its eleventh year of operations, is under-utilised.

KLIA has some 3,290ha for aeronautical activities, which allows for four satellite buildings to be built around the main terminal.

Currently, only one has been built.

An analyst with a local bank backed brokerage agrees with Tunku Iskandar.

"When you think about the government 10 years ago, telling the public that they needed to develop the KLIA in the back of beyond, because they needed space for four terminals ... and now the government has approved the construction of another airport ... it's just so unbelievable," an analyst with a local bank backed brokerage said.

But AirAsia has not always gotten its way when it comes to government decisions.

It was forced to move out of Subang Airport into KLIA, in an effort to turn it into a hub in 2002. However, Firefly, a subsidiary of Malaysia Airlines, was allowed to operate turboprop planes there some five years down the road.

"We have moved three times in the last seven years. All we want is a place where we can be allowed to grow to our full potential," AirAsia chief executive officer Datuk Seri Tony Fernandes said during a site visit to Labu on Thursday.

He said this will be yet another year the budget carrier will beat all passenger forecasts by analysts, who have lowered projections due to the economic slow down.

It forecasts that it will be able to carry 15.7 million passengers this year.

theedgedaily: The race to secure the new permanent low-cost carrier terminal (LCCT) has started. Malaysia Airports Holdings Bhd (MAHB) has finalised its master plan for a new LCCT near the existing main terminal in Sepang, while AirAsia yesterday came out with more details on its proposed terminal in Labu, Negri Sembilan.

Sources said MAHB would submit its master plan to the government soon. The irony is AirAsia is part of the steering committee that finalised and approved the airport operator’s master plan, according to a source.

“The government and AirAsia are aware of the master plan, which has been finalised and approved by the steering committee. It will be submitted to the government soon,” the source said.

“In the 16 months when the master plan was being worked out, AirAsia, which is part of the steering committee, did not raise any issue on the plan. So why are issues raised outside the meeting now?” the source said.

Transport Minister Datuk Seri Ong Tee Keat said yesterday the government had not made a decision on MAHB’s proposed new LCCT.

Meanwhile, AirAsia group chief executive officer Datuk Seri Tony Fernandes said yesterday the carrier would finalise the funding for its own proposed LCCT, named KLIA East@Labu, by April. The cost of the LCCT, excluding land cost, is estimated at RM1.6 billion.

The budget carrier is partnering Sime Darby Bhd to build the Labu terminal. On Monday, Sime Darby obtained the government’s nod to proceed with the project.

Fernandes also dismissed sceptics who contended that AirAsia would face problems in securing financing for KLIA East@Labu, which may result in MAHB’s proposal being carried out instead. He stressed that the Labu LCCT project “is definitely on”.

He said it was in talks with bankers, infrastructure funds and investors to work out an “optimum funding structure”. AirAsia may partly or fully own KLIA East@Labu, or may even just be a pure operator of the airport without having a stake in the asset, he said, adding that it was open to MAHB taking a stake in the Labu LCCT.

“We certainly do not see any issue in financing it. There are so many options available to us. The final structure has not been finalised yet,” Fernandes said at a media briefing here yesterday. Reporters were also brought to tour Sime Darby’s Labu estate earmarked for the development of the LCCT after the briefing.

The capital of owning 100% of the Labu LCCT is equivalent to buying 12 Airbus A320 aircraft, Fernandes said. “We think it’s better for infrastructure funds and investors to own the asset, and lease it to AirAsia. We will manage it. This is the model we are looking at.”

AirAsia deputy group CEO Kamaruddin Meranun added: “Sime Darby also has not finalised the structure — whether they will be equity holder, or developer, or just sell the land outright.”

Asked if other budget carriers would also be allowed to operate out of KLIA East@Labu, Fernandes said the approval given so far was only for AirAsia to use the LCCT.

The first phase of the development of the Labu LCCT, due to be completed in March 2011, will create a capacity of 30 million passengers per year. The capacity can be further increased to 50 million passengers, depending on AirAsia’s growth.

The existing temporary LCCT in Sepang, which is being expanded, has the capacity to handle 10 million passengers currently. After the expansion, which is scheduled to be completed in March, it can handle 15 million passengers.

Fernandes said AirAsia needed a new LCCT as there would be no more room for expansion at the existing terminal. By 2014, it would see a capacity shortfall of some 12 million passengers at the temporary LCCT. Other budget carriers that operate out of the existing LCCT are AirAsia’s sister airlines Thai AirAsia and Indonesia AirAsia, as well as Tiger Airways and Cebu Pacific.

p/s photo: Jang Jin Young


Ben said...

If Tony wants to build an airport, let Tony build an airport. As long... as he doesn't touch taxpayer's money.

That's the concern isn't it?

Who's going to build and maintain the roads? Will there be a toll? How much will the extra distance cost to passenger taking public transportation there? If MAHB takes over in the future, how much is that going to cost us? Who's going to build a train there, with whose money?

Leave my money alone!

MikeLing said...

Normal scenario in PPI projects:
Concessionaire: Lets include all cost and our profit in the budget. No worry, If we failed MOF will bail us out.
Contractor: Lets build it. More jobs and profits for all.

Who cares about the inconvenience caused to flyer and the additional distance.

Butt said...

Just wonder on what basis that the govt has approved such a big infra project without first knowing who the owners and financiers for such a project. Although AirAsia and Sime Darby are seen as promoters but from what we now hear is that both do not want to own it (so who are the investors? will any public funds be involved?). For Sime Darby is all about making profit from the construction. The KLIA@Labu will be such an imporatnt gateway judging from what Tony says in terms of passengers grwoth etc, shouldn't the govt need to know who will own it before approving such an important public infra even though it is a PFI project? So what's the rush? Why rust to make another hasty decision particularly when another GLC is on the losing end? why? why? why? its such simple logic and yet the govt is giving the go ahead when there's alternatives which may be not so wasteful in terms of optimisation of resources and when there's still so many unanswered questions regarding the KLIA@Labu project.

Butt said...

Just something to add. I also can't understand why can't the domestic operations be moved to Subang for both MAS and AirAsia and keep the international operations at KLIA. This is similar to Bangkok, Shanghai and other cities. If inter-lining or connectivity is the issue, surely there's some way to resolve this as other cities can do it so why not KL? Subang is now under-utilised and the LRT line can be extended to Subang airport and then you'll have a rail connectivity between KLIA and Subang although is not a very direct connection but is there's really a demand then maybe a direct rail link in the future between Subang and KLIA can be considered.

By the way this connectivity issue should not be a problem to AirAsia since Tony has always stated that AA passengers are point to point so no connectivity is required. Its only MAS that need to resolve their connectivity issue.

clk said...

The problem with our Nation is due to political vested interest in many such infra projects.

Why can't we just concentrate on 1 single underutilised airport with proper connectivity at tariffs which makes business sense not political sense?

Looking at how our airport taxis are run, I doubt this will ever happen.

It's like when we built our LRT in the KlangValley, many vested political interests resulted in poor interconnectivity. At the end, it's the poor public like us who suffer.

Looking at how empty KLIA is vs the near-capacity LCCT, this is another case of wasted resources to satisfy many political interests.

There is also lots of $ to be made in construction but less to be made in managing it!

solomon said...

I am not in favour of the airport plan until detailed plan is announced.

Having another airport could make sense if the current LCCT could not cope up with the traffic volumes. Maybe, Tony see that while we cann't. Give a benefit of doubt on this.

Economic viewpoints, it benefits the Labu dwellers. Some claimed most of them are Felda land. Yet to have details, so I am not able to comment. I still remember there was a party did pay a substantial sum to purchase land at Labu ten over years back. As a result, overnight millionaires are created there.

Like Ben said, leave my money alone? But friend, money without circulation cannot stimulate good economy....why not borrow us at Labu??

KoSong Cafe said...

Once you are a crony, you would demand something which others cannot get.

For an everyday example, just watch how some people would park at the entrance to a building with a big 'No Parking' sign simply because they want others to know, that they know the boss and therefore, are allowed to break the rules.

My impression of Tony Fernandez is one with a super big ego and full of optimism for having been successful so far, making full use of the hype available to appear larger than life.

In the case of loans availability, it is a classic case of having the track records which the banks require when one is successful - one track record leads to another when things are going great. The reverse would happen when there is reversal of fortune - a vicious circle.

So it looks like Tony wants his own LCCT to play with and he is about to get it because of his wonderful connections. It's now or never.

Tony said...

From press reports, as far as the consumer is concerned, there is on strongly positive side to this move: TF has said that the distance to Labu from KLCC is substantially shorter. that is a good thing.
Secondly, MAHB's performance has not been brilliant adn has a lot of shortcomings; a new competitor will be a good thing.