KUALA LUMPUR - MALAYSIA'S government has rejected an ambitious proposal by budget carrier AirAsia to build a $460 million (S$694.8 million) airport outside the capital, a top government official said.
AirAsia founder Tony Fernandes said earlier this year that AirAsia wanted to abandon its rudimentary and overcrowded terminal next to the main international airport, to improve its standards and lower its operational costs.
But newspaper reports said the plan was turned down on Friday after Mr Fernandes made a presentation to Deputy Prime Minister Najib Razak and senior officials from the Finance Ministry and airports authority.
AirAsia intended to build and operate the airport in Negeri Sembilan state - outside the capital Kuala Lumpur - together with Malaysian conglomerate Sime Darby.
But Mr Najib, who is also finance minister, told Mr Fernandes that the government had to reject the proposal, a government official familiar with the negotiations said on condition of anonymity.
'The government thinks the AirAsia airport plan is not a viable project. It fears the cost of the construction may escalate and it may be forced to inject funds. The government does not want the project to be a burden,' he said.
However, he said that AirAsia could still appeal to the government to reconsider its decision. AirAsia officials could not be reached for comment.
The New Straits Times on Saturday cited an unnamed source as saying that Malaysia Airports Holdings would instead build a new budget terminal to replace the existing facility near Kuala Lumpur International Airport (KLIA).
'Malaysia Airports will build a new low-cost carrier terminal near the Kuala Lumpur International Airport but they (Malaysia Airports) will have to work closely with AirAsia,' the newspaper quoted the source as saying.
'The company's (AirAsia) input in the building of the new terminal will have to be taken into consideration.'
However, Transport Minister Ong Tee Keat was quoted by the Star newspaper on Saturday as saying that a decision on AirAsia's new airport would be made only in two or three weeks' time.
'Actually the government has not made a decision on the matter,' he said.
Sime Darby had previously said it had won government approval to begin the airport project, which was to be the centrepiece of a new multi-purpose development at Labu in Negri Sembilan state.
'The new airport, which will be known as KLIA East, will provide more capacity for aircraft and passengers and enable us to bring down fares,' Fernandes told a press conference early January.
'We believe in lowering our business costs. It is the key to our success,' he said, adding that costs could be cut by 30 percent.
Mr Fernandes rejected criticism that KLIA has more than enough capacity to handle AirAsia's growth plans and that the sprawling city has no need for what would be its fourth airport.
He said the new airport would be exclusively for AirAsia, and designed to handle up to 30 million passengers annually. Construction could begin within six months with a completion date of March 2011.
An expansion of the current low-cost terminal is due to be completed by March, but by then AirAsia will already have exceeded its enlarged capacity with some 15.7 million passengers a year.
'Our projection showed that within one year the airport will be bursting at its seams again,' Mr Fernandes said.
Even with a completely new LCCT terminal, KLIA's runways cannot accommodate AirAsia's expanding fleet that will include a larger number of wide-bodied jets, he said.
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