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18 December 2017

SEPANG- We wish to provide clarification with regards to the statement made by Member of Parliament for Petaling Jaya Utara Tony Pua as reported by the Malay Mail on 15 December 2017.

Firstly, we wish to state that klia2 is not a low-cost airport terminal. Together with the government, we had made the strategic decision to build a second permanent terminal for KLIA that will accommodate increased capacity requirements, or in other words, future growth. In building it, we considered and accommodated the needs of all stakeholders including airlines, government authorities and the community.

This was a necessary approach because an airport system is a long-term public infrastructure that must serve the needs of the country's current and future civil aviation industry. This development has no bearing on the Passenger Service Charge (PSC) rates.

In January 2017, the government had made the decision to equalise PSC for the two terminals in KLIA and all other airports in Malaysia. This was done after an extensive study conducted by the Malaysian Aviation Commission (MAVCOM) on aviation charges across industry. MAVCOM has stated its position that the equalisation will facilitate an environment of fairer competition between airlines operating at these two terminals, as well as allow Malaysia to be better aligned to international guidelines, including with the International Civil Aviation Organisation (ICAO) principle of non-discriminatory pricing at airports.

We have provided numerous clarification on klia2’s development cost of RM4 billion whereby the development of klia2 took into consideration all the needs of its stakeholders such as the evolution of the low-cost airline business models which are now catering for transfer passengers and utilising wide body aircraft, as well as the projected growth by airlines in the low-cost travel segment. We have also explained numerous times to YB Tony Pua along with the other members during the PAC sessions that after numerous engagement sessions with key stakeholders, klia2 development had undergone significant scope increase due to changing requirements by the key stakeholders, including the government agencies and AirAsia.

Based on AirAsia’s growth projection, klia2 was built for a capacity of 45 million passengers, an increase of 50% over the original planned capacity of 30 million passengers at the cost of RM2 billion. Looking at current traffic performance at klia2, this decision has been validated as klia2 had registered passenger traffic movements of 27 million passengers in 2016, barely 3 years after it begun operations in May 2014. In addition to the increased capacity requirements, our airline requirements are constantly evolving, driven by the targeted passenger segment requirements. As such, the strategy behind klia2 is for it to be a full-fledged terminal with similar facilities to that at KLIA main terminal, and offers scalable services, depending on current requirements.

Among other things, we also took into account the regulatory changes which required for separation of arriving and departing passengers for both domestic and international passengers that had resulted in the need for a bigger terminal from a 3 to a 5-storey terminal. The full segregation of passengers was to tighten safety and security at klia2 against exposure of human trafficking. Back at the old LCCT there was mixing of passengers. The increase in scope also included a longer 4 km runway as requested by the airline, all the associated government infrastructure such as a new air traffic control tower and elevated roads. These had translated to the increase in development cost.

Since January 2017, the PSC rates have been equalised for all airports at RM73 for non-ASEAN international, RM35 for ASEAN, and RM11 for domestic, with the exception of non-ASEAN international PSC rates specifically at klia2 that remained lower at RM50. In fact, the new tier for ASEAN PSC rate was introduced at a reduction of 46% from RM65 to RM35 that benefited about 18 million passengers and made the airlines more competitive for the ASEAN routes, as part of the government’s efforts in attracting more tourist arrivals from within the ASEAN countries. We would like to highlight that as at YTD November 2017, traffic growth for non- ASEAN remains robust despite the higher PSC at RM73 and enjoyed a higher growth at 15.1% than ASEAN at 13.6%. This is not surprising as 70% of the non-ASEAN international passengers at KLIA and klia2 terminals are foreigners and unaffected by the PSC rates. This last phase of equalisation is for non-ASEAN international PSC at klia2 from RM50 to RM73, involving about 4.5 million departing passengers a year of which about 70% or 3 million are of foreign nationalities.

All airport charges in Malaysia are levied based on the fact that airports in Malaysia are managed as a network. Malaysia Airports, as the country’s major airport operator operates a network of 39 airports nationwide including 16 domestic airports and 18 short take-off and landing ports (STOLports) on a cross-subsidization model. There is a PSC rate mechanism that is already in place by the government in our Operating Agreement.

This network and cross subsidisation model allows for Malaysia Airports to operate airports in locations which are not profitable (as in the case of STOLports and most domestic airports) but yet provide the whole country with the necessary connectivity. Hence the standardised airport charges across all airports in Malaysia. This same model applies to all other aeronautical charges as well such as landing and parking charges for aircraft. As an example, in the case of domestic PSC – the same rate is applied in Lahad Datu Airport and in KLIA regardless of differences in available facilities. Likewise for international PSC rates, the passengers usingPenang International Airport pay the same PSC as KLIA main terminal. It was only different in klia2 where the PSC is lower compared to our other international airports.

The PSC rate is independent of the cost of airport development. Whereas some other countries charge passengers with a separate airport development fee in addition to the PSC, this is not the case in Malaysia. Our PSC rates remain one of the cheapest in the region and in the world, even after the full equalisation.

We are a profitable public-listed entity with stringent governance practices and transparent financial performance and plans. There has never been any necessity for a government bail- out for Malaysia Airports as its financial standing remains as strong as it had been for the last 10 years. For Q3 2017, Malaysia Airports had posted profit after tax (PAT) of RM79.7 million with revenue of RM1.2 billion. The strong increase in PAT of more than six-fold increase over the same period last year was underpinned by the strong passenger growth in 2017. Malaysia Airports has been playing an active role in increasing tourism into the country through multiple collaboration at federal, state and international levels.

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