Malaysia breaks ground on new terminal for budget airlines

Malaysia has broken ground on the construction of an airport terminal for Asia’s booming budget aviation sector, which it hopes will help make Kuala Lumpur a regional transport hub.

The new terminal, which will cost 108 million ringgit (28 million dollars) and initially handle 10 million passengers a year, will rival a similar terminal planned at Singapore’s Changi Airport.

Work on the facility at the futuristic Kuala Lumpur International Airport (KLIA) will start this month and take nine months to complete, officials said Monday. Deputy Prime Minister Najib Razak said the project was part of efforts to strengthen the aviation industry in Malaysia and boost economic growth.

“This is a very important development and is a good sign that our aim of making KLIA a regional aviation hub will be achieved,” he said. “Based on an average growth rate of 7.5 percent a year, it is forecast that KLIA will handle 25 million passengers by 2007.”

The government is in talks with Malaysia Airports to upgrade KLIA, including building another terminal to cope with an additional 10 million passengers after levels hit the existing 25 million capacity in 2007.

At the budget airline terminal, the cost to carrier is the same as at KLIA’s main terminals, and AirAsia chief Tony Fernandez called for lower charges, saying that “for the hub to be successful we have to have the lowest fares”.

“If we have the lowest fares then we’re going to whip the Singaporeans hands down. For us to have the lowest fares we have to have the lowest costs … We hope the government supports us in meeting the Singaporeans; it’s about time we beat them,” he said. Air Asia is currently the only budget carrier that has confirmed it will use the new facility.

Analysts said however that its prospects were good and that it was likely to attract business from the many low-cost carriers in the region. Malaysia’s AirAsia alone “should be enough to keep the terminal busy for the next three to four years,” said Chris Eng, aviation analyst with OSK Research.

The government announced the decision to build the terminal at KLIA earlier this year. AirAsia, Southeast Asia’s biggest low-cost carrier, had previously lobbied for the former main airport Subang, which lies closer to the capital, to be made into the low-cost hub in order to keep expenses down.

AirAsia began operations at Subang airport near Kuala Lumpur but moved to KLIA, some 50 kilometres (30 miles) south of the city, in July 2002 in line with the government’s plan to make KLIA the main gateway for Malaysia.

AirAsia’s success has sparked a slew of other low-cost airlines, notably in neighbouring Singapore where privately-owned Valuair, Qantas-backed Jetstar and Singapore Airlines’ 49 percent-owned Tiger Airlines operate.

Elsewhere, Thailand has seen three budget airlines emerge since early last year, Australia has two low-cost carriers that hold more than a third of the domestic market and Indonesias Lion Air flies to Malaysia and Singapore as well as internally.


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