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26 July 2018

SEPANG- As one of the world's biggest airport operator groups, we are constantly benchmarking successful airports in the world in our objective to turn Malaysia into a strong global hub. According to the International Civil Aviation Organization (ICAO), an indicator of a strong hub will be the magnitude of its air connectivity i.e a network’s concentration and its ability to move passengers from their origin to destination seamlessly. Among other factors, a hub will be able to bring about benefits if it has strong home-based carriers, extensive routes coverage, variety of commercial airlines, high flight frequencies, efficient facilities for connecting flights, strategic location and sufficient airport capacity with efficient airline operations and passenger processing.  In other words, a true hub requires seamless integration of facilities and airport terminals as well as extensive connections between all types of airlines, be it full service or low cost.   

The Malaysian aviation industry is poised to capitalise on growth that is centred within the Asia Pacific region. Based on the International Air Transport Association (IATA) 20-Year Passenger Demand Forecast, APAC will be the biggest driver for demand from 2015 to 2035 with more than half of new passenger traffic coming from the region. Four out of five of the fastest growing markets in terms of additional passengers per year will be from Asia i.e. China, India, Indonesia and Vietnam. To leverage this growth, the Malaysian aviation industry should work towards a common goal of building a strong global aviation hub. 

Building a strong hub is not about facilitating a single airline business model. It involves the seamless integration and connectivity of all systems and network of airlines. IATA and Airports Council International (ACI) recommends where feasible, existing terminals should be fully utilised before new ones are built. It also recommends where possible that the operations be contained within a single terminal to allow for the lowest possible Minimum Connecting Time (MCT) for connectivity and hub development. A lower MCT is a catalyst for more airline operations offering connectivity and compounded growth. In other words, this means that as many airlines as possible should be seamlessly connected, preferably through a single terminal, or for bigger passenger volume through integrated terminals so that connecting times are minimised resulting in a seamless connectivity. 

In the case of KL International Airport (KLIA), its MCT has more than tripled since the addition of its second terminal – first with the LCCT and subsequently, klia2. As KLIA’s Main Terminal and klia2 are not fully integrated, its MCT is more than 3 hours. In contrast, Singapore’s Changi International Airport has effectively consolidated its operations into an integrated connected environment where even low-cost carriers (LCCs) are seamlessly integrated with full service carriers (FSCs). This has ensured that MCT is mostly 60 minutes across all its terminals. KLIA’s MCT is also currently longer when compared to Hong Kong International Airport and Soekarno Hatta International Airport, Jakarta.

As this situation in KLIA continues, there will be a progressive reduction of KLIA’s visibility in the airline Global Distribution System (GDS) due to lower connections and longer MCT. GDS assists in global flight bookings and a high MCT will naturally push KLIA’s visibility to the lower levels. This lack of global visibility may result in KLIA becoming a feeder airport to the rest within the region instead of getting stronger as a global hub.

As such, it is in the nation’s interest to take a leaf out of Changi’s books by encouraging full connectivity between all airlines. This same strategy has proven effective in Kota Kinabalu International Airport (KKIA) when we consolidated all operations within a single terminal back in 2015. The MCT at KKIA is now 60 minutes - a significant improvement from more than 3 hours when operations were segregated in Terminal 1 (T1) and Terminal 2 (T2). 

Proof of the success of this strategy lies in the strong growth that KKIA achieved after the consolidation of T1 and T2 operations. A disintegrated environment will be a regressive step for the Malaysian aviation industry. 

In successful global hubs such as Dubai and Amsterdam, FSCs tend to dominate due to strong long and short/medium haul connectivity. We cannot underestimate the importance of FSC connectivity in building a strong hub. For example, with Malaysia Airlines code share with British Airways (BA) through oneworld alliance, it is able to access the traffic available from BA's home base across its connectivity. KLIA is currently connected to 1,028 destinations via 268 airlines through Malaysia Airlines oneworld’s alliance. Thus far, LCCs such as AirAsia do not yet have such possibilities as it primarily attracts point-to-point traffic although it is connected via its own network from 13 airlines and 129 destinations. AirAsia is a crucial player in the local aviation industry whereby their willingness to integrate their operations with other airlines in the Malaysian network could be the turning point for our national aviation industry and would bring about the quantum leap in traffic growth. Having separate terminals for LCCs may not be the only solution for collective growth of the aviation industry and for increasing passenger experience. While we may have differing views, the aviation industry players in Malaysia have a common objective for growth and strengthening Malaysia's position as a global aviation hub. 

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