KLIA East: A Shrewd Business Move
Now, I’ve been following the brouhaha over Air Asia’s proposed plan to build its own low-cost terminal at Labu with some interest over the past few weeks. When Tony Fernandes’ government-approved proposal for KLIA East was first made public, it immediately attracted a maelstrom of backlash and public outcry. Critics argued that first, the inevitable duplication of airport services and infrastructure would be a waste of resources and public funds, and second, the grossly underutilised KLIA could easily accommodate Air Asia’s thirst for capacity.
In response, Air Asia launched its own online PR campaign. According to Air Asia:
a) The airline expects demand to outstrip capacity at the existing LCCT by 2011, and is in dire need of a replacement before it receives full delivery of its new fleet of 100 Airbuses
b) Despite being MAHB’s biggest customer, all of Air Asia’s attempts to engage MAHB in discussion about a new low-cost terminal at KLIA were decidedly ignored
c) With Sime Darby on board, Air Asia promises that the cost of building KLIA East and providing associated services and infrastructure would be entirely privately financed
I can understand the public’s skepticism over Fernandes’ promise to avoid tapping into public funds – oft-quoted examples include certain airport operations like Customs, Immigration and Quarantine, and KTM and ERL lines. However, having dug through piles of articles and comments over these few weeks, I feel that the gurgle of hot tempers have missed the point completely.
Tony Fernandes is an impressive entrepreneur. After buying the struggling airline from government-owned DRB-Hicom for a grand total of RM 1 in 1996, he has since grown Air Asia into Asia’s largest budget carrier.
I believe that the KLIA East proposal was a deliberate and shrewd tactic to get things moving. Now that the dust has settled somewhat, the proposal and ensuing publicity appears to have achieved two subtle objectives – first, it boosted Air Asia’s bargaining power dramatically, and second, it forced the issue so far into the spotlight that MAHB and the government could no longer ignore it. Indeed, since the proposal went public, the government revoked its approval (a whole other kettle of fish) and pushed MAHB and Air Asia into negotiations. The result: a commitment from MAHB to complete a new low-cost terminal at KLIA by 2011 and valuable concessions to Air Asia in terms of cost and features of the new terminal.
Did Air Asia really have the means to build its own airport on the terms it outlined or was this a carefully orchestrated stunt?
Ultimately, this sandiwara is a painful reflection of the inefficiencies that plague our business environment. Whether it be highways and toll concessions, automobiles and approved permits or MAHB and the airline industry, decades of protectionist policies have made complacency, cronyism and rent-seeking a recurring theme among our GLEs. Can you blame Air Asia, whose profit margins depend on keeping costs low, for taking matters into its own hands?
It is sad when our business environment stifles enterprising Malaysians, forcing them to resort to a kind of political tango and manoeuvring that would make the plot of Desperate Housewives seem trite in comparison. This “two steps forward, one step back” way of getting things done does not bode well for Malaysia’s economic progress.
I think people should cool off and think about the real ‘why’ behind this spectacle. Admittedly, the ideal solution to this – taking away the protectionist policies and clamping down on rent-seekers – will require a paradigm shift in the mentalities of our political and business leaders. Without a commitment to improving efficiency and a willingness to take the country’s long term interests to heart, it will be, tomorrow and everyday after: rinse and repeat.
In the meantime, with the hand dealt to him, I daresay Tony Fernandes played his cards boldly and won.
In response, Air Asia launched its own online PR campaign. According to Air Asia:
a) The airline expects demand to outstrip capacity at the existing LCCT by 2011, and is in dire need of a replacement before it receives full delivery of its new fleet of 100 Airbuses
b) Despite being MAHB’s biggest customer, all of Air Asia’s attempts to engage MAHB in discussion about a new low-cost terminal at KLIA were decidedly ignored
c) With Sime Darby on board, Air Asia promises that the cost of building KLIA East and providing associated services and infrastructure would be entirely privately financed
I can understand the public’s skepticism over Fernandes’ promise to avoid tapping into public funds – oft-quoted examples include certain airport operations like Customs, Immigration and Quarantine, and KTM and ERL lines. However, having dug through piles of articles and comments over these few weeks, I feel that the gurgle of hot tempers have missed the point completely.
Tony Fernandes is an impressive entrepreneur. After buying the struggling airline from government-owned DRB-Hicom for a grand total of RM 1 in 1996, he has since grown Air Asia into Asia’s largest budget carrier.
I believe that the KLIA East proposal was a deliberate and shrewd tactic to get things moving. Now that the dust has settled somewhat, the proposal and ensuing publicity appears to have achieved two subtle objectives – first, it boosted Air Asia’s bargaining power dramatically, and second, it forced the issue so far into the spotlight that MAHB and the government could no longer ignore it. Indeed, since the proposal went public, the government revoked its approval (a whole other kettle of fish) and pushed MAHB and Air Asia into negotiations. The result: a commitment from MAHB to complete a new low-cost terminal at KLIA by 2011 and valuable concessions to Air Asia in terms of cost and features of the new terminal.
Did Air Asia really have the means to build its own airport on the terms it outlined or was this a carefully orchestrated stunt?
Ultimately, this sandiwara is a painful reflection of the inefficiencies that plague our business environment. Whether it be highways and toll concessions, automobiles and approved permits or MAHB and the airline industry, decades of protectionist policies have made complacency, cronyism and rent-seeking a recurring theme among our GLEs. Can you blame Air Asia, whose profit margins depend on keeping costs low, for taking matters into its own hands?
It is sad when our business environment stifles enterprising Malaysians, forcing them to resort to a kind of political tango and manoeuvring that would make the plot of Desperate Housewives seem trite in comparison. This “two steps forward, one step back” way of getting things done does not bode well for Malaysia’s economic progress.
I think people should cool off and think about the real ‘why’ behind this spectacle. Admittedly, the ideal solution to this – taking away the protectionist policies and clamping down on rent-seekers – will require a paradigm shift in the mentalities of our political and business leaders. Without a commitment to improving efficiency and a willingness to take the country’s long term interests to heart, it will be, tomorrow and everyday after: rinse and repeat.
In the meantime, with the hand dealt to him, I daresay Tony Fernandes played his cards boldly and won.
