Why spend RM300mil for Subang airport regeneration plan, govt asked

An expert report suggests the project will disadvantage KLIA and may not benefit Subang airport.

In June, transport minister Loke Siew Fook announced the Cabinet’s approval of a plan to redevelop Subang’s Sultan Abdul Aziz Shah airport into a regional hub.

KUALA LUMPUR: An aviation industry insider is questioning why almost RM300 million in taxpayer funds is required for a plan to regenerate the Subang airport, despite expert advice questioning its viability.

In June, transport minister Loke Siew Fook announced that the Cabinet had approved the redevelopment of Subang’s Sultan Abdul Aziz Shah airport (SZB), with design and other details to be finalised within a month.

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The decision followed a proposal by Malaysia Airports Holdings Berhad (MAHB) to redevelop SZB into a regional aviation hub in a joint venture with Subang Skypark Sdn Bhd (SSSB).

According to the well-placed source, the arrangement will see SSSB appointed the contractor for the project.

SSSB is a subsidiary of WCT Holdings Bhd, owned by property tycoon Desmond Lim.

The project will involve the construction of a new “green” airport terminal, commercial buildings and carpark.

The source said the joint venture plans to seek as much as RM290 million in taxpayer funds for the project.

In addition, it intends to impose an airport development surcharge on passengers over 15 years – provisionally fixed at RM6 per pax for Malaysians and RM30 for foreigners.

It is also understood that MAHB’s board approved the plan despite a feasibility study generating unfavourable results and without the proposal being referred to the finance and transport ministries.

The study, conducted by Netherlands Airport Consultants (NACO),  based in The Hague, said the plan will eat into traffic at Kuala Lumpur International Airport (KLIA) and may cause Malaysia’s premier international airport a loss of up to two million passengers annually.

It projected that flights which presently land in KLIA would be redirected to SZB, and said Malaysia Airlines, which operates out of Sepang, will be impacted negatively.

Despite that, SZB may still not be able to draw regional passengers in sufficient numbers, the source said, because of the low number of large passenger jets plying the region.

It also runs the risk of losing its focus as a maintenance, repair and overhaul (MRO) and private jet hub, the source said.

The source also said international airlines would likely prefer to operate out of KLIA because of the presence of aviation partners and better connectivity.

A shift of regional airlines to SZB may also deter foreign carriers from expanding their Malaysian operations.

“MAHB, which previously opposed the plan, must also explain its change in stance,” the source said.

Two years ago, The Edge Markets reported a projection by the national airport operator that the regeneration plan would cause it to lose up to RM11.9 billion in revenue.

“So, why the sudden U-turn,” asked the source.

Meanwhile, a separate source, speaking on condition of anonymity, also questioned the plan.

He said the process did not sit well with the unity government’s Madani aspirations of good governance, transparency and accountability.

He also said it raised multiple questions.

“Firstly, why is RM300 million in taxpayers’ funds needed given the financial strength of the project’s proposed joint venture partners,” he asked.

“If public funds are necessary, the process should have gone through an open tender to determine the best business model and the most optimal use of government money.

“In the absence of an open tender process, what criteria was used for the selection of the contractor?”

The source also called for the government to justify the additional airport development surcharge to be levied on passengers.

FMT is attempting to reach MAHB and SSSB for comment.

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