Uphill battle for govt if it plans to eject MAHB from Subang airport

The government and Malaysia Airports Holdings Bhd (MAHB) will face a lengthy and tedious process if the former intends to allow a new player to manage the Sultan Abdul Aziz Shah Airport in Subang, Selangor.

The process includes getting the approval of MAHB’s board of directors and its international investors for the government-linked company to deviate from their operating agreement (OA).

Eyebrows were raised following WCT Holdings Bhd’s proposal in wanting to re-concession Subang airport. WCT Holdings is owned by businessman Tan Sri Desmond Lim.

MAHB had in the past, put forward plans to rejuvenate the iconic Subang airport. Its wholly-owned subsidiary, KLIA Aeropolis Sdn Bhd had last month, revealed an RM1.3 billion regeneration development for the airport – to transform it into an aviation hub in Asia-Pacific.

Twentytwo13 has learnt that the plan was in fact tabled to the government, specifically to then Prime Minister Datuk Seri Najib Razak, in 2018.

However, a change in government took place after the 14th general election. It was public knowledge that MAHB and the Transport Ministry did not see eye to eye during Pakatan Harapan’s brief tenure in Putrajaya.

“MAHB has plans for Subang. There were hiccups but the plan is back on track. Hopefully, this latest development will not disrupt the plans again,” said a source familiar with the saga.

“If the government even thinks of wanting to get rid of MAHB, it’s best they refer to the OA.”

In 2009, the government had granted the concession and exclusive rights to MAHB to operate 39 airports in the country. The concession period is until 2034.

It is understood MAHB had submitted a supplementary OA for the lease to continue until 2069. The Finance Ministry was notified of the separate agreement and request to extend the lease in the fourth quarter of last year but have yet to respond to the request.

WCT Holdings, in a filing with Bursa Malaysia on May 7, said its proposal is currently a “concept paper”.

There were allegations that the current government is rushing to seal this deal. Amanah deputy president Datuk Seri Salahuddin Ayub recently urged the government not to take advantage of the emergency to sell the airport. It is said WCT Holdings has major plans, which would see it redevelop the 101.17ha landbank located some 20km away from the heart of Kuala Lumpur.

“The OA clearly states that if the government intends to deviate from the agreement, both it and MAHB are required to sign a supplementary agreement for the termination, and complete four processes,” said the source.

The four processes are:

  • MAHB’s board of directors must give its blessings to enter into the supplementary agreement to terminate.
  • Appoint an independent advisor as per Bursa Malaysia’s listing requirements.
  • MAHB’s shareholders, including 26 per cent of its international investors, must be informed and agree to the termination.
  • Obtain the approval from MAHB’s sukuk holders.

“Many corporations within and outside the aviation industry are paying close attention to this. If the government of the day somehow manages to get MAHB to agree to carve out Subang airport, then the fear is that it could also happen to them. Imagine toll concessionaires.

“The other way around is for the government to not give MAHB an extension beyond 2034. Then, fresh tenders will be called and MAHB, together with other interested players, can try their luck. Many things can happen over the next 13 years. A possible change in government, corporations going bust… the list goes on.”

Another source raised security concerns over the proposed deal.

“The airport is also used by police and the Royal Malaysian Air Force. MAHB is a government-linked company. Will it be safe for a private entity to oversee the nation’s security operations?” he asked.

However, it must be noted that private companies had been tasked to oversee national security matters, including providing MyKad microchips, passports, and to run the Malaysia Immigration System.

MAHB knows it will be on the losing end if Subang airport is taken away from the company. Only a handful of the 39 airports it manages are sustainable, and Subang is one of them. In order for airports to be successful, they need to cater for international flights.

AirAsia’s Tan Sri Tony Fernandes, had, in an interview with The Edge Malaysia Weekly in March, said: “I think if Subang is turned into a city airport and run by different people … I don’t think one authority should own all the airports.”

The source added: “Many people, especially those in the Klang Valley and from up north, would prefer to fly out from Subang than KL International Airport (KLIA). This would force the likes of Malaysia Airlines, and even AirAsia, to run flights from Subang.

“If MAHB is given the boot from Subang, it will only make financial sense to cut cost and downsize its staff in KLIA. That would mean people losing their jobs.”

“Then again, those intending to take over Subang will obviously promise job opportunities.”