KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) expects passenger traffic at the airports it owns or manages to improve between 60 per cent and 70 per cent of pre-Covid-19 levels this year as the coronavirus-ravaged airline industry experienced its sharpest-ever decline in passenger demand during 2020.
Group chief executive officer Datuk Mohd Shukrie Mohd Salleh said this would be underpinned by the rollout of Covid-19 vaccines programme in the second-half of 2021 and gradual reopening of international borders.
"However, there is still a lot of uncertainty and fluidity with regards to the outlook for the aviation industry as most of the country is now back under Movement Control Order (MCO) with restrictions on interstate travel.
"The third wave of infection has led to a spike in most countries and we expect international borders to remain closed for quite a while," he said in a virtual briefing with selected media recently.
The airport operator believes that in a best-case scenario, international traffic will only return to pre-Covid-19 levels in 2023.
MAHB also did not see any airlines ceasing their operations in the Kuala Lumpur International Airport (KLIA) last year but rather, almost 60 per cent of airlines had resumed their operations albeit with reduced frequencies.
"We welcomed Taiwan-based Starlux Airlines to Penang International Airport in 2020, and recently, on January 5, 2021, welcomed its inaugural flight to KLIA for the Kuala Lumpur – Taipei route.
"We also welcomed four new cargo airlines namely the YTO Airlines, Ethiopian Cargo, Cargolux Italia and My Jet Xpress in 2020," he said.
Mohd Shukrie said MAHB had given away about RM400 million in financial assistance comprising moratorium, rental waivers, rental discounts, operational fee waivers and contract extension to its partners including retailers and airlines.
"Our assistance is meant to alleviate the financial burden to our partners and ease their cashflow. Some of this assistance has been extended until 2021 and may extend further depending on the traffic recovery," he said.
Mohd Shukrie said the priority is to ensure the group survival and sustainability, because unlike airlines which can scale down their operations, airports have to continue operating.
"We are fortunate because we are a financially viable company with sufficient resources to continue our operations. We entered 2020 with a strong position as we had a good year in 2019 but after a year of Covid-19, the strength of our balance sheet has been eroded.
"As much as possible, we do not want to burden the government, but we strongly urge the government to extend assistance to the entire aviation ecosystem through some form of support such as tax relief and incentives," he said.
On the status of MAHB's operating agreements (OAs) with the government, Mohd Shukrie said finalisation is still ongoing but it had cleared most of the terms in the agreements.
"We are now in the last mile with only a few more to finalise. As talks are still ongoing, we are not able to provide details but we are anticipating getting it signed by the middle of this year," he said.
He said the regulated asset base (RAB) framework may not be the only funding model to be considered as there are other options and flexibility for other sustainable funding mechanisms.
"Our financial survival depends on international traffic because we do not make much revenue from domestic traffic. Unless the government decides to change the mechanism on how we operate, we remain highly dependent on international traffic and hope international borders can be opened soon," he said.
Mohd Shukrie said under the current OA, investment for airport expansion or capacity upgrading is under the government but moving forward there could be multiple options under the new agreement.
"The new OA will provide greater flexibility and include other mechanisms. We are almost there with a few more terms to finalise. It also needs to get cabinet approval. We target to sign the new OA by the second quarter (Q2) this year," he said.
Mohd Shukrie said the new OA would include financing and revenue mechanism for any airport expansion depending on the amount and nature of the expansion.
"We have multiple formulae to work with under the new OA. It gives more flexibility for (the government and MAHB) beyond the RAB which would have an implication on the passenger service charge (PSC)."
He also said MAHB wishes to retain its function as the sole airport operator in the country.
"While we are open to strategic partners within the sphere of our other diversified business such as KLIA Aeropolis, the airport business is our core business.
"We believe that we are the most competent to run airports in Malaysia considering the decades of experience we have in running airports in Malaysia and overseas.
"We are operating a network of 39 airports across Malaysia based on a cross-subsidisation model whereby only a handful of the airports are profitable. As the sole operator, we can leverage our financial resources to support all the airports," he said.
The government-linked company is responsible to operate 39 airports in Malaysia (five international airports, 16 domestic and 18 short take-off and landing airports (STOL ports).
MAHB also owns and operates the Istanbul Sabiha Gokchen (ISG) International Airport and provides facilities management services at the Hamad International Airport in Doha.