HIGHER COSTS FOR BUILDING KLIA2

Speculation is rife that the cost of KLIA2 has increased significantly from the initial estimates of between RM2 billion and RM2.5 billion.

Officials from Malaysia Airports Holdings Bhd (MAHB) declined to comment on the cost of the project, emphasing that even if there was an increase in expenditure in constructing the KLIA2, it would not affect the passengers nor the airlines. “The only avenue for us to recoup the costs is from non-aeronautical revenue such as the retail segment,” said an official.

The official was commenting on speculation that the cost of completing the KLIA2, the new low-cost carrier terminal (LCCT), has escalated to more than RM4 billion and a costlier airport would mean MAHB has to increase its charges — including airline parking and landing fees and airport taxes — to recoup its investment. The MAHB official said these concerns are unfounded because aeronautical charges are regulated.

“It’s already set in stone and subject to review every five years. It should not matter if the cost is above RM2.5 billion because MAHB will account for all costs. It is not the government or any airline’s concern as we can’t simply raise charges. Be mindful that aeronautical charges, particularly PSC (passenger service charge), are never based on the cost of building MAHB’s airports. Airports are never built on ROI (return on investment). It’s very unlike the models they have in the UK ... the ROI for MAHB on KLIA2 is only based on non-aeronautical income,” said the official.

It has been reported recently that the KLIA2 retail space, which takes up about 20% of the terminal area, will generate some RM1.2 billion in revenue.