Malaysia plans $1.4b spending to improve congested airports

A Malaysian Airlines flag flies in front of the traffic control tower at Kuala Lumpur International Airport in Sepang.
A Malaysian Airlines flag flies in front of the traffic control tower at Kuala Lumpur International Airport in Sepang. PHOTO: REUTERS

NEW DELHI (BLOOMBERG) - Malaysia plans to spend about US$1 billion (S$1.36 billion) over the next five years to refurbish and expand its airports as the Southeast Asian country paces infrastructure growth with a surge in passenger traffic, its main airport operator said.

"My main terminal may require some upgrade," said Badlisham Ghazali, managing director of state-controlled Malaysia Airports Holdings Bhd, referring to Kuala Lumpur International Airport. "There are other airports that have grown beyond capacity," including the tourist island of Langkawi, Kota Bharu in the north and Kota Kinabalu in Sabah, he said.

The upgrade of facilities is likely to benefit regional airlines such as AirAsia Bhd, Southeast Asia's largest discount carrier, which are expanding their fleets and adding more routes as rising incomes and competitive fares encourage more Asians to fly. Boeing is projecting 100 million new passengers annually in the region. Malaysia-based AirAsia, the biggest operator of Airbus Group SE's single-aisle aircraft, signed a deal in July for 100 A321neos to help maintain its industry lead.

The proposed investment is a fraction of Hong Kong International Airport's estimated spending plan of HK$141.5 billion (S$24.73 billion) to add a third runway. Singapore's Changi Airport will have a fourth terminal by 2017 at a cost of S$1.28 billion to handle 16 million passengers annually.

The Malaysian government will foot part of the planned US$1 billion investment, with the rest coming from Malaysia Airports, Mr Badlisham said in an interview in New Delhi on Sept 7.

Malaysia's transport ministry didn't respond to an e-mail seeking comment.

Shares of Malaysia Airports Holdings have gained about 17 per cent this year, compared with little change in the FTSE Malaysia KLCI Index in the same period.

Kuala Lumpur's new budget passenger terminal probably will hit its peak annual capacity of 45 million passengers much earlier than projected, although it won't require much fresh investment as most facilities for planned capacity have already been built, Mr Badlisham said. The terminal's main user is AirAsia Bhd., Asia's largest budget carrier, which last year criticized the facility over water-logging and taxiway cracks.