TRANSPORT PLANNING - AIRPORT

Heathrow offers to fund building of third runway

Britain's biggest airport, London's Heathrow, has urged the government to let it build a third runway, saying its plans would provide more flights, less noise and be cheaper and quicker to build than rival proposals.

The UK government and business leaders want to expand flights to fast-growing economies to ensure the country does not miss out on billions of pounds of trade, and with Heathrow operating at 99 percent capacity, more runways are needed, reported Reuters.

However, under pressure from green groups and its Liberal coalition partners, the Conservative-led government overturned a decision to build a third Heathrow runway after it came to power in 2010, and the move is also vigorously opposed by London's Conservative mayor, Boris Johnson, whom many commentators view as a potential rival to Prime Minister David Cameron.

Heathrow submitted its plans to a government commission looking into raising airport capacity, which is due to publish an interim report by the end of next year, with a final verdict due in mid-2015, after the next general election.

The West London-based airport, part owned by Spain's Ferrovial, suggested three options: placing a new runway to the north, northwest or southwest of the hub.

Each option would deliver extra capacity by 2025-29 for US$21
billion to $27 billion, and would be cheaper and quicker to build than rival hub options being proposed by Johnson and Stansted Airport, Heathrow said.

"There will be more pigs flying than aircraft if we are to believe the claim that three runways at Heathrow will make less noise than two," Johnson said after the plans were published.

"Their proposal would be a disastrous outcome for Londoners, nor would it solve our aviation capacity crisis as a fourth runway would need to be in the planning process before a third was even open."

Johnson is backing the development of a rival airport and earlier this week set out his plans, which include a new four-runway hub 40 miles east of central London and the possible demolition of Heathrow.

"Heathrow is not in the wrong place, it's in the right place for business," said Matthews, adding that hundreds of firms were based within 25 miles of the hub because of the links it offers.

"After half a century of vigorous debate but little action, it is clear the UK desperately needs a single hub airport with the capacity to provide the links to emerging economies which can boost UK jobs, GDP and trade."

As well as environmental groups, Heathrow's plans are opposed by local residents. A government report showed noise pollution levels of at least 57 decibels affecting around 260,000 people living near the west London site.

However, Matthews said by 2030 between 10 and 20 percent fewer people would be within Heathrow's noise footprint with a third runway, due to altered flight paths and the benefit of improved air-traffic control technology and quieter planes.

Heathrow said it preferred the two westerly options as they minimised the noise impact on local residents though they would cost more, and take longer to build than the north option.

The southwest runway, proposed to be built over two reservoirs, would be the most expensive and complex to build, but would mean aircraft noise affecting the fewest people.

Heathrow said all three options offered the chance of adding a fourth runway in the future, if needed, and said it would fund the runways itself rather than asking for taxpayers to pay.

Each option would raise capacity to 740,000 flights a year from 480,000 currently, and cater for 130 million passengers, up from the 70 million passengers that used the hub last year.

Johnson has proposed that London should have a four-runway airport, which would be either a new hub 40 miles east of central London on the Isle of Grain, or further out in the Thames Estuary on an artificial island, or at an expanded Stansted airport, to the northeast of the city.

Each of these projects would be deliverable by 2029, costing up to $99 billion, Johnson said.

PRIVATISATION TO ACCELERATE AIRPORT EXPANSION

Brazil gets a handsome $14b for three airports

Brazil took a major step toward modernising its airports on Monday by selling multi-year concessions worth US$14 billion to operate three of the busiest hubs, and secured a huge premium from local and international companies.

As with other areas of Brazil's stretched physical infrastructure, the country's airports are groaning under the rapid expansion of the domestic market, reported Dow Jones Newswires.

Brisk economic growth and record low unemployment have created millions of entrants into Brazil's middle class. That in turn has spurred air traffic growth of double-digit rates, with demand jumping 16 percent in 2011 to about 180 million passengers.

The government is also scrambling to be ready to receive visitors to the 2014 World Cup and the 2016 Olympic Games. Privatisation is seen as a mechanism for accelerating the expansion plans, as red tape tends to tie the hands of the government-run airports operator, Infraero president Gustavo do Vale said.

Contracts to upgrade and operate airports in the cities of Sao Paulo, Campinas and Brasilia were sold for a total of $14 billion, more than four times the government's initial asking price, a reflection of strong demand for the opportunity to manage the infrastructure of one of the world's fastest growing airline markets.

"The result is a positive sign that this country is a place where investments are safe and profitable," said Wagner Bittencourt, Brazil's Civil Aviation Secretary, which oversaw the auction process.

Brazil opted last year to privatise several airports, and sold a small airport in Brazil's northeast. Monday's auction marks a major step forward.

The prize asset, the Guarulhos airport in Sao Paulo, was taken by Investimentos e Participacoes em Infraestrutura SA or Invepar, a holding company made up of construction companies and some of Brazil's largest pension funds – together with Airports Co South Africa. The partners bid $9.41 billion, considerably higher than the next bid of $7.5 billion, made by EcoRodovias Infraestrutura e Logistica and Germany's Fraport.

"We are very confident about the bid we made," said Gustavo Rocha, chief executive of Invepar. "The bid was made based on months of studies and modeling. We didn't make the bid just to scare off other bidders."

Guarulhos was considered to be the most attractive of the batch because it already has a huge flow of customers, and so guaranteed revenues. The airport in Brasilia is smaller, but still has a significant customer base; its concession was picked up by Brazil's Engevix construction firm and Argentina's Corporacion America, with a bid of $2.62 billion, seven times the minimum.

Transportation company Triunfo Participacoes won rights to operate the Viracopos airport in Campinas, which is slated to become Brazil's biggest airport, but which will require the mosinvestment, at $5.06 billion. Triunfo partnered with construction company UTC Participacoes and France's Egis Airport Operation to bid $2.21 billion, more than double the starting price of $871.69 million.

Despite bringing in private-sector operators, the government is still expected to pay a dominant role in the funding for the airports, via the national development bank, or BNDES, which has agreed to lend about 80 percent of capital needs – excluding the amount paid for the licence – at heavily subsidised interest rates.

"During the first phase we will make use of BNDES, as it will be enough to start construction work," Triunfo's Bottarelli said.

"We may use infrastructure bonds. We know what rates BNDES charges, let's see what the market asks for."

Infrastructure bonds are a new class of debt for which the government is in the process of creating new incentives including tax cuts.

Meanwhile, the success of Monday's auction is likely to encourage more concessions later this year. Secretary Bittencourt told reporters the government is planning concessions for airports in Rio de Janeiro and Belo Horizonte.

AirAsia-MAHB, Passenger Wants Best of both World

Friday December 9, 2011

AirAsia-MAHB drama aside, passengers want good facilities, low fares

Friday Reflections - By B.K. Sidhu

THE fiery spat between AirAsia Bhd andMalaysia Airports Holdings Bhd (MAHB)over the past two weeks has somewhat turned ugly with each party resorting to showing documents to prove their case.

This is something unseen in the aviation industry and will not be easily forgotten.

But the good thing is that there has been a ceasefire.

The brouhaha stemmed from the fact that Malaysia was going to get a “super class” low-cost air terminal that many have not conditioned their minds to, as they are more used to a low-cost carrier terminal (LCCT) that resembles a “horse stable”.

Low-cost air travel was introduced to us a decade ago.

In fact, yesterday was AirAsia's 10th anniversary.

Low fares good facilities wanted:For the travellers, all the drama does not mean much. They just want good facilities, low taxes and airfares, as well as world-class service. These days the choices are aplenty, such as Changi Airport, SIA, Scoot, Emirates and Qatar Airways. - EPA file pic

Before Dec 8, 2001, most Malaysians had no clue what low-cost or no-frills air travel was.

There was no choice, only premium service provided by Malaysia Airlinesand that meant forking out big bucks for a flight.

The KL-Singapore-KL, a 45 minutes flight then was RM840, and a roundtrip to London cost over RM6,000, but the fares now can be a fraction of that.

This article is not intended to boost the egos for those behind AirAsia, but it's fair to say the airline has changed the aviation industry. AirAsia gave many people a lifetime opportunity to take to the skies.

After Tan Sri Tony Fernandes and his partners famously took over AirAsia (and its losses) for RM1, they started with two aircraft, two destinations and 200 employees.

Today, it is three times bigger and has flown more than 142 million people.

It started at Subang, moved to the KL International Airport, and then a dedicated LCCT was built because its growth was phenomenal and the airline needed to keep its costs down.

At the rate it is growing, the airline will expand four to five times larger than its original size over the next decade. Its growth is unstoppable as the people want a cheap way to travel.

Naturally, a bigger facility is needed and according to its estimates, it would be able to carry 30 million passengers by 2015/16. Being an airport operator, MAHB has to ensure its biggest LCC (low-cost carrier) client had the space it needed to cater for that growth.

MAHB began planning the KLIA2. At one time, AirAsia entertained the idea of building its own terminal in Labu, Negri Sembilan, but that was shot down by the Government.

Initially, the plan was to build a terminal to cater for 30 million passengers. However, after taking into consideration the robust growth AirAsia had targeted, MAHB decided to plan for 45 million passengers and that meant nearly doubling the construction cost to between RM3.6bil and RM3.9bil.

That huge price tag became an issue for Fernandes. His biggest fear was that the cost would translate into higher rental and the likes. At the same time, MAHB got the green light to raise the passenger service tax (PSC).

This was when the real war broke out as Fernandes decided to get the public involved in a campaign against the PSC hike.

His rationale was that travel cost must remain low or no one would fly AirAsia.

These two issues became a hot topic and it was not Fernandes alone fighting the MAHB; his entire team entered the battlefield.

Up to that point, MAHB and its MD Tan Sri Bashir Ahmad had never been confrontational although it was widely known that there had been times when AirAsia has had frosty relations with the airport operator.

Therefore, many were surprised when the docile MAHB finally retaliated and went on the offensive as well. Both parties had to burn the midnight oil to prepare for the onslaught.

But amid the heat of war, it takes an equal amount of courage to lay down arms. Both sides did so because they realised that prolonging the fight would not benefit anybody. MAHB offered the olive branch and Fernandes accepted it, saying “enough is enough.”

Hopefully, this chapter is closed for good.

For the travellers, all the drama does not mean much. They just want good facilities, low taxes and airfares, as well as world-class service. These days the choices are aplenty, such as Changi Airport, SIA, Scoot, Emirates and Qatar Airways.

Deputy news editor B.K. Sidhu hopes for 10 sen fare to Dehli.

AIRASIA - A BIGGER KLIA2?

AirAsia refutes MAHB's claim that it asked for a bigger KLIA2

BERNAMA - Monday, December 05, 2011

KUALA LUMPUR, (Bernama) - The feud between AirAsia Bhd and Malaysia Airports Holdings Bhd (MAHB) took a turn for the worse when the low-cost carrier today refuted claims by the airport operator that AirAsia was the main reason for the cost of the new low-cost terminal, or KLIA2, to increase substantially. 

​

In a statement here today, the low-cost carrier also said it did not ask for a bigger KLIA2. AirAsia has called for a press conference tomorrow at its headquarters in Sepang to refute MAHB's claims of asking for a bigger KLIA2. 

The budget carrier also provided copies of two official letters sent by AirAsia to MAHB and vice versa to prove that it should not be blamed for the price tag of KLIA2 to almost double. AirAsia, MAHB's biggest customer, said its chairman, Datuk Abdul Aziz Abu Bakar, had in a letter on November 2009 to MAHB managing director Tan Sri Bashir Ahmad Abdul Majid, cautioned that the location of KLIA2 at KLIA West was not suitable and would cause construction costs to soar. 

"The site will definitely be more expensive than the planned budget of RM2 billion," AirAsia said, adding it had also estimated for MAHB that the construction cost will increase to RM3.6-RM3.9 billion. In a separate letter dated Aug 9 this year, Bashir had written to AirAsia X chairman, Tan Sri Rafidah Aziz, claiming that the proposed KLIA2 would be sufficient to handle 30 million passengers per annum. 

"This figure has never been officially changed by AirAsia or MAHB since Aug 9, 2011," AirAsia said, in refuting claims made by MAHB in an article entitled "Why KLIA2 has to be bigger" posted on its website. 

According to the article, MAHB claimed that AirAsia had been the one to estimate that passengers per annum (ppa) at the new terminal would reach 28.7 million by 2015, 45.3 million by 2020 and 60.3 million by 2025. AirAsia chief executive officer, Tan Sri Tony Fernandes, had also dismissed MAHB's justifications for doubling the cost of KLIA2 from its original RM2 billion estimate in 2009 to RM3.9 billion currently. 

AirAsia had mentioned in a letter that the airline should not be held accountable for cost over-runs arising from the incorporation of these needs. The airline also refuted MAHB's claim that it had asked for a fully-automated baggage handling system (BHS), which is believed to have caused delays in construction, saying it had only asked for a semi-automated BHS. 

"The MAHB board had unilaterally decided on a fully-automated BHS to accommodate 45-60 million passengers, which was again not agreed to by AirAsia," it said. 

AirAsia said its request for a 3,000-metre runway had been based on its original requirement to MAHB to cater to the wide-bodied Airbus A330 aircraft, which were operated by Air Asia X. Later, the airline said, MAHB has since shortened the runway length to 2,750 metres, which can only cater to the A320 aircraft, without consulting AirAsia. 

"As such, this should not be considered as an additional request/requirement from AirAsia as the original plan has always been for a 3,000-metre runway. "Therefore, no additional cost should be incurred," it said. In a response just hours later, MAHB released two letters, one written by Fernandes to Bashir, and another from Bashir to Rafidah, containing correspondence showing that AirAsia had agreed to a fully-automated BHS. 

According to the letter, Fernandes said this was because the low-cost carrier had developed a new state-of-the-art passenger and baggage check-in system, which would be rolled out at the new LCCT2 (KLIA2). 

He had also said in the letter provided by MAHB that AirAsia's passenger growth would continue well beyond 30 million passengers to levels as high as 50-60 million passengers. He had also said that within less than five years of opening day (2017), "our projections will be in excess of 35 million ppa." 

As late as October 2011, Bashir had in a letter to Rafidah providing further clarification on the decisions made regarding the BHS, said that MAHB's board of directors had decided to proceed with Option 3, i.e. a fully-automated BHS, which was in line with AirAsia's request to ensure a powerful BHS. 

Such a system would have the capacity and flexibility to support AirAsia's growth and development over the long-term. Bashir said that MAHB had conveyed the board's decision to AirAsia. Turning to AirAsia's press release earlier, MAHB said a total of 47 meetings have been held between MAHB and AirAsia since April 2010 until now to discuss and address all of AirAsia's requirements. 

AVIATION - Airport Terminal

Malaysia says cost of new budget airport to double

Malaysia's airport operator said the cost of a new airport for budget carriers has nearly doubled to 3.9 billion ringgit ($1.2 billion), and will open nearly a year later than planned, reported Associated Pres Newswires.

Malaysia Airports Holdings said plans for the airport have now been "significantly upgraded with superior facilities" including aerobridges and an automated baggage system. The airport will be able to accommodate 45 million passengers annually, up from 30 million previously, it said.

The greater expense was criticised by AirAsia – the main user of the terminal. Its chief executive Tony Fernandes said that amenities such as aerobridges were a waste of money and would not be used by his airline. He also expressed doubt that annual passengers could hit 45 million.

Malaysia Airports defended its decision to install aerobridges to assist the sick, elderly and young children, saying the additional cost was negligible at US 8 cents) per passenger. Due to the changes, the "KLIA 2" airport is expected to open only in April 2013, instead of mid-2012, it said.

Fernandes slammed Malaysia Airports for overspending amid the current global economic uncertainty. Singapore's budget terminal has no aerobridges, he said.

"We won't use them," he responded on Twitter. "American Airlines just gone into bankruptcy. And Malaysia Airports spends $1.23 billion. I am sure that's not the final figure."

AirAsia, the region's largest no-frills airline by fleet size, has said a bigger terminal is crucial to its survival with passengers expected to reach 30 million and its fleet to grow to 184 planes by 2013. The existing budget airport can only accommodate 15 million people and has insufficient airplane parking bays.

In 2009, AirAsia proposed to build and operate a $504 million budget airport in a southern state but the government rejected the plan amid concerns it may undermine the country's international airport. It subsequently unveiled plans for KLIA 2, located just two kilometers west of the main airport.

Malaysia hopes the new budget airport will bolster the country's international airport as a significant air hub in the region rivaling Singapore's Changi Airport and Thailand's Suvarnabhumi Airport.

Malaysia's international airport, with annual passengers of around 17 million and capacity of 25 million is relatively small compared with regional rivals. Changi's three main terminals and one budget terminal have a combined capacity of nearly 69 million passengers. Actual passenger numbers are around 42 million a year, similar to Suvarnabhumi, which opened in late 2006.

AVIATION - Airport Facilities Upgrade

KLIA2 baggage system upgrade to cost MAHB RM100mil more
By B.K. SIDHU
bksidhu@thestar.com.my

PETALING JAYA: Malaysia Airports Holdings Bhd (MAHB) would be upgrading the baggage system at the new low-cost carrier terminal, KLIA2, to be fully automated based on requests made by airlines and this would cost the airport operator an additional RM100mil and push the completion date beyond October 2012, sources said.

It involves redesigning the original baggage system planned for the airport and hacking parts of the airport, which is already 40% complete. The decision on the upgrade of the baggage system only came recently following discussions with airlines, the source said. The original plan was to have a semi-automated system and now the contracts which were awarded early this year would have to be revised.

MAHB would be holding a press conference tomorrow to provide updates on KLIA2.

KLIA2, once completed, would be the most modern low-cost air terminal in Asia to cater for more than 30 million passengers and it would also have the longest skybridge in Asia.

The airport is no longer based on its original design where its terminal building was to be sited on a 150,000 sq m area.

To meet regulatory requirements for segregation of international and domestic passengers, the terminal will now be almost double its original size at 255,000 sq m.

“With a bigger terminal building that has a longer runaway and so many other requests made by airlines, including the new baggage system upgrade, the cost to build KLIA2 will go up to about RM4bil.

“Whatever the reasons, the changes have been made to accommodate the airlines because they would be using the terminal eventually .

“It should be the most modern to meet future requirements,'' said another source.

A fully automated baggage system would provide for faster and more efficient sorting of bags and with such an upgrade, KLIA2 baggage system would be at par with the KLIA main terminal building.

A lot of the additional requests came at the point when the designs were already done and the construction had begun,” said the source.

RAM Ratings, meanwhile, reaffirmed the respective long and short-term ratings of AAA and P1 for Malaysia Airports Capital Bhd's (MACB) RM3.10bil Islamic medium-term notes programme (2010/2025) and RM1bil Islamic commercial paper programme (2010/2017).

Both facilities have a combined limit of RM3.1bil in nominal value and are collectively referred to as “the sukuk”. The long-term rating has a stable outlook.

It said MACB was a special-purpose vehicle set up by MAHB to undertake the issuance of the sukuk for the latter.

MAHB is the exclusive 25-year concession holder that operates, manages and maintains the KLIA and 39 other airports in the country.