Another look at Labu LCCT

23-01-2009

KUALA LUMPUR: The cabinet in its meeting on Wednesday decided to study again the plan by AirAsia Bhd and Sime Darby Bhd to build a low-cost carrier terminal (LCCT) in Labu, Negri Sembilan, sources said.

They said the cabinet had asked AirAsia to make a presentation to the Ministry of Finance and Economic Planning Unit next Friday on the proposed KLIA East@Labu, with the view that a project of similar scale and specifications can be carried out within the Kuala Lumpur International Airport (KLIA) grounds in Sepang.

“The Cabinet is leaning towards the airport now being constructed within KLIA,” one of the sources said. It is learnt that if the airport is to be built within KLIA, the cost can be kept to RM1.3 billion, lower than the estimated RM1.6 billion for the Labu LCCT.

It is understood that the government would ask Malaysia Airports Holdings Bhd (MAHB) and AirAsia — the two parties racing to build their own LCCTs — to “work together” towards a win-win solution.

When contacted, AirAsia group chief executive officer Datuk Seri Tony Fernandes told The Edge Financial Daily that as AirAsia understands it, the status of the KLIA East project is “approved”.

On Jan 5, the government gave Sime Darby the green light to proceed with the Labu LCCT project, which has been on AirAsia’s drawing board for the past one year.

Since the announcement, there has been mixed response from the public on the need for a new LCCT.

The proposal invited criticisms from, among others, former prime minister Tun Dr Mahathir Mohamad, who sarcastically condemned the Labu LCCT in his blog post dated Jan 12, although he later toned down his criticisms in a post dated Jan 17, suggesting that AirAsia’s needs can be catered for in the huge space at KLIA.

Advocates of KLIA East are concerned that MAHB would not be able to complete its proposed new LCCT adjacent to KLIA in time to cater for AirAsia’s exponential growth of both passengers and fleet.

Fernandes had said AirAsia would “go bust” in two years’ time if it does not have a new terminal. The carrier is looking at a new terminal by March 2011. Fernandes also raised the question of cost in his justification for KLIA East as he felt a LCCT built by MAHB may be expensive and may not fit into price-sensitive AirAsia’s operations.

Meanwhile, opponents argue that the country already has KLIA, which was built at a cost of RM10 billion, but is still grossly under-utilised, and that KLIA has enough space for expansion to cater for more passengers.

They deem the Labu LCCT a wasteful project given that new runways, control tower and fuel tank have to be built when these already exist in KLIA. They also questioned building a terminal exclusively for AirAsia when the airline and other no-frill carriers in the region can operate out of KLIA.

Despite AirAsia’s assurance that the Labu LCCT would be entirely a private initiative, sceptics worry that taxpayers’ money would eventually be spent on road and rail extensions to and from the terminal, as well as setting up new customs and immigration operations.