As the government embarks on a new airport development model amid a challenging economic climate, Raja Azmi said his overriding mission was to ensure connectivity within the country and to bring value to its stakeholders.
While some say private sector participation would break MAHB’s “monopoly” on airports, Raja Azmi said the label was a misnomer, given that MAHB wasn’t a true monopoly as it did not have control over the pricing of passenger service charges (PSC) and airport charges, which are regulated by the government.
In an interview with FMT, Raja Azmi, who oversees the operations of 39 airports in the country, said only eight of the 39 were profitable. The traffic volume, PSC and airport charges collected at these eight airports can cover the operational costs.
He said this meant it was necessary for the company to cross-subsidise so that the less profitable regional airports, or stolports, could sustain their operations.
“In essence, we’re operating a network of airports to ensure Malaysians from all walks of life have access to travel,” said Raja Azmi, who holds a Master of Business Administration from the University of Bath, UK.
“Take the case of Sarawak, where the Kuching International Airport is profitable but the 12 stolports in the state such as those in Mukah, Marudi and Bario, aren’t. So we need profitable airports to sustain the smaller airports.”
Raja Azmi said this didn’t mean that MAHB was against private investors entering the fray, but that it had to be for the right reasons.
“Say there’s a need to expand an airport. If we have the capacity, we’d like to be given the opportunity, but if we don’t have the capacity to do it ourselves, then there is an opportunity to work with private investors.”
Balancing act
Raja Azmi is also navigating MAHB through a new operator’s agreement (OA) at a time when the government is pushing for the adoption of the regulated asset base model (RAB).
Under the current OA, Putrajaya takes an 11.8% cut – known as a user fee – from MAHB’s annual revenue to the tune of RM300 million to RM400 million.
At the same time, the government, given its financial constraints, wants private investors to develop airports. To this end, the RAB will allow airport operators to fix airport charges according to investments they put in.
And Raja Azmi is confident that MAHB can adapt to the business changes.
“Under our current OA, the roles and responsibilities are clearly defined, we handle the operating expenditure and the government provides the capital expenditure. But over the years, we’ve received less than 10% of the capital expenditure we’ve requested to expand the airports’ capacity.”
So, he said, MAHB had spent some RM4.4 billion of its own money to develop and expand the capacity of its airports, to accommodate more airlines and passengers.
“The LCCT’s last volume was close to 22 million passengers per annum and there was no more room for airlines to grow there as the LCCT capacity was designed for 15 million passengers. But klia2, which we built, can cater to 45 million passengers per annum,” he said, adding that in 2017, klia2 recorded 30 million in passenger traffic due to its bigger capacity.
“In Penang, the expansion of the Penang International Airport hasn’t just increased its carrying capacity, but has also drawn new airlines like Cathay and Qatar Airways.”
So, he said, MAHB would also be able to take on the role of providing capital expenditure if it could get an extension of its OA and the RAB, which would allow it to recoup its investments.
Serving stakeholders
In all this, Raja Azmi said, MAHB wanted to ensure Putrajaya did not lose out on revenue, while saving on capital expenditure by paying Putrajaya a fixed absolute amount of user fee, rather than one based on a percentage which increases every year.
“So if we now give the government RM300 million to RM400 million, we strive to maintain that amount so they don’t lose out.”
The RAB, he said, was crucial to allow MAHB to recoup its investments based on how much it put into an airport.
“Currently, there’s no correlation between the level of service and airport charges which are set by the government. So anything we spend on increasing the quality of our infrastructure and assets comes from our own capital expenditure.
“With the RAB, we will be able to earmark expenditure for specific purposes from the charges we are allowed to impose,” he said, adding that MAHB had plans to improve the facilities at airports and bring them up to date for the benefit of the airlines, passengers, and retailers.
“I am here to serve them well, to delight them with an airport that goes beyond just being an airport.”
Eyes on the future
Raja Azmi – who’s had stints in auditing houses, multinational companies and GLCs – said he expected Malaysia’s air traffic to double within the next 20 years.
“In order to make this happen, we have to ensure that the airport capacity, services and facilities are supported with automation, advanced technology and digitalisation.
“This will give Malaysia the competitive edge to capture the exponential growth expected in the region to become a strong hub.”
He said this would be good for MAHB’s shareholders, who in the past 14 years had enjoyed a 777% total shareholder return, the highest of the GLCs in the country.
“This was made possible through the network and cross-subsidisation model that added stability to the industry. We want to continue to have a sustainable model for our shareholders.”