‘COMPENSATE MAHB FOR ASSET UPGRADE’
Tweaking operating agreement will enable operator to invest significantly in KLIA’s aerotrain, baggage system
THE government will need to tweak its operating agreement with Malaysia Airports Holdings Bhd (MAHB), in particular the concession to operate the Kuala Lumpur International Airport (KLIA), said sources.
This is in return for a significant investment by MAHB to upgrade ageing assets.
The sources said the current agreement did not state MAHB should undertake maintenance works for airports and allocate capital expenditure for the construction or expansion of new buildings, baggage handling system and aerotrain upgrade.
It is believed that the airport operator will undertake critical ageing asset replacements at the KLIA this year. This includes a 1.5km rail track and aerotrain as well as the 42km conveyor for the baggage system.
An industry source said MAHB could exhaust its cash reserve if the upgrade was undertaken without the government’s financial support.
The source said MAHB should be compensated so that it could recoup its investment in the asset upgrade.
“The government could extend the operating agreement, in terms of future repayment or adjust the annual user fee,” the source told the New Straits Times.
Another source claimed that the structural upgrade should be undertaken during the Covid-19 pandemic as traffic was not high.
“But MAHB’s cash flow will be severely affected without the recurring income from aeronautical and non-aeronautical revenue.”
The source said investors would not favour the “upfront” investment by MAHB for the baggage and aerotrain upgrade due to the volatile situation.
Major structural upgrades have been delayed due to the impending agreement with the government.
The new operating agreement may also determine a funding mechanism with options and flexibility for sustainable growth.
The government in April 2019 extended the operating agreement for MAHB to operate, manage and maintain airports until Feb 11, 2069. This allows MAHB to implement a commercial development plan sustainably while improving revenue-sharing with the government.
“If the government does not want to spend on the upgrade, MAHB should spend it,” said the source.