Saturday, January 17, 2009

Labu LCCT – make it genuinely private

Air Asia boss Tony Fernandez has taken his lobby for a new terminal at Labu on-line. Do take a look.

I personally doubt the practicality of having Air Asia's proposed Labu terminal so close to the existing KLIA at Sepang. The two runways will be only 7km apart. A jet plane coming in to land travels at about 350km/hour, so it can cover this distance in just 1.2 minutes. I am worried about safety issues, compounded by Labu having separate air-traffic control from Sepang. How will they coordinate?

But Air Asia on its website says “AirAsia regards the safety of our passengers and staff as of utmost importance. We will not compromise on this issue”. Taking this at face value, we should certainly support all private sector initiatives that add value to the Malaysian economy, and benefit the rakyat, even more so in these trying times.

Any economically viable low-cost-carrier-terminal (LCCT), whether at KLIA or at Labu or wherever else in Malaysia will help add value to the Malaysian economy. A viable LCCT means many flights, which means more connectivity and greater potential for business and tourism activities. It may also help spur development activities around the LCCT.

The key though, is economic viability. Air Asia believes that its passenger traffic will soar by nearly 60% in the two years to 2010. It expects to carry 15.7m passengers in 2010, from just 10m last year in 2008. I think that's a heroic assumption. Airlines elsewhere all over the world are reducing flights and leaving planes parked on the ground because passenger traffic has collapsed.

But perhaps Air Asia does have a magic formula that can generate such strong growth in this weak environment. And if Air Asia and Sime Darby, as private sector entities, believe enough in their capabilities to put their own capital on the line, we should not stand in the way. However, there must also be NO taxpayer involvement. The BN government should publicly and firmly say there will be no direct, or indirect government involvement whatsover:

1)Besides the cost of the Labu terminal and the runway, the cost of any other ancillary facilities such as new roads and highways to connect to Labu will be 100% privately borne;
2)There will be no government guarantees or reassurances to lenders (like there were for the toll highways);
3)Labu will compensate the government for the cost of providing services such as immigration, customs and air-traffic control (ATC);
4)In the event of Labu being not viable for whatever reason, including passenger growth being less than Air Asia's forecast, the government will not provide any assistance whatsover as it is a pure private sector initiative.

1 comment:

Anonymous said...

On the face of things, the Labu proposal appears to be absurd. Anyone tracking where does the money trail for the acquisition of land and construction of the airport?