reprinted from:

Schiphol in good position to push for reforms 

By Eirmalasare Bani
Copyright 2001  New Straits Times Press (Malaysia)
Article date: December 20, 2001
 

Dutch airport operator Schiphol, which signed a memorandum of understanding in August to acquire a 30 per cent stake in Malaysia Airports Holdings Bhd, is likely to have better luck in pushing for reforms and liberalisation in the local travel industry.

Analysts said Schipol is, for a start, expected to make greater headway than MAHB in getting the necessary approvals for a rise of RM20 in international airport tax to RM60 and RM10 in domestic airport tax to RM15.

"Malaysia Airlines was allowed to increase its domestic fares, and highway operators their toll charges. It should be the same for MAHB," said a sectoral analyst of a local research firm. MAHB, the operator of Malaysia's 37 airports, has had problems attracting a sufficient number of passengers and airlines to transform its main airport, the Kuala Lumpur International Airport (KLIA), into a regional hub.

KLIA has a capacity to handle up to 30 million passengers annually but has so far only seen a peak of some 18 million. And amid the global economic slowdown, annual arrivals have fallen to 16 million currently.

In contrast, Singapore and Bangkok are running at almost full capacity, handling 28 million passengers and 30 million a year, respectively.

The increase in airport tax is one of the terms of negotiation for the Dutch group to buy into Malaysia's sole airport operator.

Other conditions include priority for Schiphol in future construction jobs at the KLIA, and a key role in the development of the KLIA Master Plan as well as a say in domestic airports' development.

More importantly, the Dutch group is also believed to have requested that MAHB divest its non-core assets which have weighed on the group's earnings over the past two years.

Towards this end, MAHB is already in talks with several parties, including national oil corporation Petroliam Nasional Bhd, to sell off businesses like the Sepang International Circuit and the National Exhibition and Convention Centre.

In turn, Schiphol - which operates the Amsterdam international airport, considered one of the best in the world - is offering cash injection and a clear strategy to turn around the Malaysian company.

Analysts pointed out that MAHB's present management, given all of the challenges faced, has not made much headway in turning the RM10 billion KLIA into a passenger or transit hub.

With Schiphol as a strategic partner, government control on routes and flight frequencies into KLIA might be relaxed and that should help, they said.

The Dutch company might be more inclined to open up the market to other airlines to spur traffic into KLIA, which, however, raises the question of fifth freedom rights.

At the moment, except for a select few approved by the Government, foreign airlines are not allowed to carry passengers to destinations other than their home countries.

The fifth freedom, as stipulated by the International Air Transport Agreement in Chicago in 1944, refers to the right to carry passengers between two countries by an airline of a third country.

If this regime is relaxed, some capacity may be attracted from Singapore and Bangkok, thus increasing Kuala Lumpur's chances of becoming a hub.

The Schiphol Group is 75.8 per cent owned by the Dutch Government, 21.8 percent by the Municipality of Amsterdam and 2.4 per cent by the Municipality of Rotterdam.

The Malaysian Government owns 72.24 per cent of MAHB through the Minister of Finance (MOF) Inc and Khazanah Nasional Bhd.

It is understood that MOF is in talks to sell a 30 per cent stake in MAHB for between RM2.60 and RM3.00 a share to Schiphol. The sale involving about 330 million shares will rake in between RM858 million and RM990 million.
 

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