New Govt-MAHB Agreement to Provide More Flexibility In Funding, Choice of Partners In Airport Development, Management

Transport Minister Anthony Loke during the press conference to announce the Cabinet’s approval of a proposal for a new Operating Agreement between the Government of Malaysian and Malaysia Airports Holdings Bhd.

KUALA LUMPUR, Feb 9 – The Government and Malaysia Airports Holdings Bhd (MAHB) are expected to sign a new agreement – Operating Agreement (OA) 2023 – that will provide them more flexibility in the development and management of 39 airports and airfields (Short Take-Off and Landing Airports-STOLports) in Malaysia for the period until 2069.

Unlike the existing OA, which limits funding methods for the development of airports – as MAHB only manages the airports and any funds for development, be it for airport buildings or runway, can be approved only by the government, – the new agreement will include terms that provide flexibility in the funding methods for airport development, Transport Minister Anthony Loke said at a press conference held at his ministry today.

Under the OA2023 proposal, which has been approved by the Cabinet, the Government and MAHB will have the flexibility to fund airport development costs either using Government allocations through Development Expenditure (DE) or MAHB through any suitable investment recovery model mechanism, subject to the mutual agreement of both parties.

This will enable the Government and MAHB to implement a more competitive commercial development plan with the potential to enhance the government’s income through revenue sharing derived from government-owned land that is developed by MAHB, the minister said.

Towards this, MAHB will be able to also collaborate with any selected investment partner for an airport development, while allowing it to prepare a better long-term development plan for all the airports under its purview, the minister said, adding that MAHB’s performance and achievements in airport management have been commendable in Malaysia and abroad.

In addition, the implementation of the OA 2023 will allow MAHB to help reduce the Government’s burden by taking over the development costs of competitive airports in the future.

The OA2023 is expected to be finalised and signed along with related Lease Agreements before the end of the first quarter of this year.

To a question on whether foreign parties will be allowed to invest in the airports if the method of funding is through investment, Anthony Loke said foreign investment will be allowed but it would have to be through MAHB.

He also pointed out that MAHB was a listed company and foreign funds currently had over 20 percent equity in it.

Anthony Loke also said a separate Airport Development Fund (ADF) will also be established under Section 9 of the Financial Procedures Act 1957 [Act 61], to receive contributions from airport users, the public and also airlines. Under the plan, 50 percent of the Passenger Service Charge (PSC) component that is taken into account in the calculation of the User Fee will be channelled to the ADF trust account and the monies will be used only for the purpose of airport development and operations.

The Government will also have the right to restructure the airport industry through clustering, carving out, divestment of airports, closure of existing airports or terminals or the restructuring of the ownership of any of the facilities subject to the mutual agreement with MAHB.

The minister also announced that the Cabinet had agreed to a proposal to rebrand KLIA and klia2 to KLIA Terminal 1 and KLIA Terminal 2. He said this was to improve their marketability value and effectiveness, in addition to strengthening competition with international airports in the region.

He did not disclose any cost amount that would be involved in the rebranding exercise but said that it would take time as it involved various regulations.

— WE