MAHB focuses on liquidity
Airport operator slashes capex by 82%
SEPANG: The transportation and aviation industries are, without a doubt, the worst hit during the coronavirus (Covid-19) pandemic as governments restricted movement and closed national borders.
Malaysia Airports Holdings Bhd (MAHB) is expecting a spike in the number of aircraft and passenger movement from July onwards but it would be nowhere near pre-covid numbers.
It is anticipating a pickup in domestic and international travellers next year but a full recovery could only come about by the second half of 2021 to 2022.
Currently, traffic trends for most of the group’s airports were only coming up to 15% to 20% of pre-pandemic numbers.
And in times of adversity like this, liquidity is a company’s best friend, which leads to MAHB shifting its focus on cashflow for survivability rather than profitability.
The airport operator has since slashed its 2020 capital expenditure budget by 82.22% from Rm1.8bil to Rm320mil.
The group will only be focusing on critical projects, including the replacement of ageing assets, runway rehabilitation, washroom refurbishment and a commercial reset.
This is part of the group’s aggressive cost optimisation plan to keep itself relatively stable as it mitigates the impact of Covid-19.
Group chief executive officer Datuk Mohd Shukrie Mohd Salleh said the Rm320mil will be for projects that were deemed critical to push ahead, such as to replace their ageing end-to-end baggage handling system and aerotrains, runway upgrade, commercial reset and a single token initiative driven by facial recognition.
With aircraft and passenger traffic hitting bottom lows in recent months and no indication that the numbers would rebound to pre-covid levels anytime soon, MAHB is of the opinion that Covid-19 gave them the perfect timing to embark on the upgrading projects.
“We have proceeded with the runway upgrade. This is the best time. We had issues at one point because the airlines said the upgrading works affected the frequency of their flights.
“We are also looking to replace our ageing baggage handling system and our aerotrains. Both projects will be awarded this year.
“As for the commercial reset, it is also the best time now to do renovations without much hassle,” he told a media briefing here after the group’s virtual AGM yesterday.
MAHB has a net cash of Rm2.8bil as at March 31, 2020 and it is well endowed when it comes to liquidity.
It currently has an approved credit line of Rm1.7bil, which is ready to be drawn down as and when they need it and on top of that, an untapped sukuk facility of Rm1.5bil.
“Effectively, we have Rm3.2bil waiting for us. This will help us in managing our liquidity going forward.
“As much as we could, we’ll try to use our own internal cash flow,” he said.
Group chief financial officer Mohamed Rastam Shahrom said the company’s rating is AAA with a stable outlook.
Elaborating on the group’s cost optimisation plan, Shukrie said MAHB pared down its operating costs by 20% and shareholders have also raised questions on why the group could not cut its costs further.
He explained that with the exception of MAHB’S airports in Perak and Melaka where there were no flights at all, all its other airports remained running throughout the movement control order (MCO) period even though there was only one flight a day for that particular airport.
“That’s pretty much the constraint that we have on how much we could bring down the cost.
“We’re not like airlines due to the nature of our operations and we don’t have the option to stop operating our airports.
“In terms of regulation especially by the Civil Aviation Authority of Malaysia (CAAM), there’s a clear guidance for the number of people you must have for a certain operation and airport size,” said Shukrie.
Asked if MAHB would consider trimming its workforce, he stressed that the group will try to maintain its staff of around 10,000 people, which will be important for MAHB when demand starts to pick up again. Until then, the challenge for MAHB is just to hold on.
Shukrie added that MAHB will continue to revisit its cost optimisation numbers and may have to revise it to up to two to three years.
Meanwhile, MAHB is also intensifying its efforts to drive its non-aeronautical revenue.
Shukrie said as the group proceeds with its commercial reset plans, they hope that new retail offerings will contribute in driving sales.
“We have also expedited our plan to launch our e-commerce platform called shop my airports so that retailers can expand their market beyond the airport.
“We also aim to hold an airport-wide mega sales to help them clear their inventory,” he said, adding that apart from the three-month moratorium on rental and charges that the group has offered since April, it is also exploring the extension of the tenure for newly signed contracts to allow its retailers more time to recover their capex investment.
Based on historical trends on market resilience after multiple aviation setbacks, Shukrie is optimistic that the group will be able to recover within a reasonable period of time.