MAHB’s new chief softens stance on AirAsia

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TO airline industry observers, relations between Malaysia Airports Holdings Bhd (MAHB) and the AirAsia group have been strained in the last few years. But many believe that the days of tension and misunderstanding are over.

That is because MAHB’s new managing director Datuk Badlisham Ghazali is ensuring that he gets off on the right foot with its airline customers — particularly AirAsia Bhd, its largest customer at the new low-cost-carrier terminal in Sepang, also known as klia2 — as he is banking on them to lure more passengers to the 39 airports it manages countrywide.

The appointment of the former CEO of the Multimedia Development Corp (MDeC) comes during a difficult period for Malaysia’s aviation industry, following the twin tragedies of Malaysia Airlines (MAS) flights MH370 and MH17, which have affected passenger traffic to the country.

But a better relationship with AirAsia, which accounts for more than 80% of klia2’s air traffic, could help change that.

“My past experience — both at HP (Hewlett-Packard) and MDeC — has been [about] understanding and managing customers [and] working with clients and partners. I take that attitude and that’s why one of the first few things I’ve done after taking on the job [at MAHB] is to meet those who make us successful, that is, our airline partners,” he tells The Edge in his first media interview since his appointment on June 23, 2014.

“Specifically with AirAsia, I have had five face-to-face meetings with Aireen [Omar, AirAsia Bhd’s CEO] and her team in three months,” he says.

It was just a few months ago that MAHB pointed out the difficulties it was having in dealing with AirAsia, which had refused to move to klia2 from the old low-cost carrier terminal (LCCT) on the May 2 opening date until all safety and security issues had been resolved and, later, use the SITA check-in system at the new terminal.

Badlisham believes that all these issues belong in the past.

“Tony (AirAsia co-founder and group CEO Tan Sri Tony Fernandes) and I know each other socially and casually. So, yes, I have talked to him and we shared our views. We’d like to think that we have a respectful attitude towards each other.

“As you move into anything new in the airport business, there are bound to be issues. While there were operational issues on day one (of the klia2 opening), we knew what we had to do together with AirAsia to make everything work,” he says.

These include accommodating a Tune Hotel at klia2 and allowing AirAsia’s corporate office to remain at the old LCCT until its new head office is completed at klia2 by the end of next year.

“We want you (AirAsia) here ... Demonstrating our partnership, we know that AirAsia has not built its corporate headquarters [yet]. We have agreed that AirAsia will retain its corporate office at the old LCCT [for now].

Badlisham: We (MAHB and AirAsia) are in bed together. What’s not good for AirAsia from an airline operation perspective is also bad for us. Photo by Chu Juck Seng

“While that does not allow us to maximise the asset (old LCCT) and turn it into an air cargo logistics hub now, we know it is also not good for us to push the issue with our largest customer. And so, we are trying to do a workaround in the short term,” says Badlisham.

“It was a decision that I think was necessary for both sides. Moving them out [of LCCT] will cause disruption to its operations and we don’t want that because it affects our business at the terminal. So, we will have a short-term solution. They have announced that their corporate building will be ready by the end of 2015,” he adds.

Badlisham points to another example of MAHB’s “forgetting the past” in its deployment manpower to assist AirAsia when the latter suffered delays and prolonged check-ins two weeks ago.

“We (MAHB and AirAsia) are in bed together. What’s not good for AirAsia from an airline operation perspective is also bad for us. And so, whatever they needed, we helped out in all sorts of manner.

“We don’t want their reputation to be tainted, and we don’t want passengers’ experience at the KL International Airport (KLIA) to be affected,” Badlisham says.

“I [will] carry out that kind of conversation moving forward. Aireen and I have a list of items that we are trying to work through. Some are easier than others [to solve],” he adds.

Still, Badlisham’s soft approach to AirAsia differs from that taken by his predecessor Tan Sri Bashir Ahmad, who clashed with Fernandes over some of MAHB’s decisions, including the increase of airport tax back in 2011, the relocation of the old LCCT, and at klia2, the use of aerobridges, the numerous opening delays and the ballooning costs.

While the tension between the two individuals was palpable, MAHB gave in to many of AirAsia’s demands. Eventually, the costs for klia2 doubled to RM4 billion after the terminal was given a significant upgrade.

Fernandes tells The Edge that MAHB and AirAsia have a “better” relationship now that klia2 is up and running, and describes Badlisham as a “good guy”.

“[Badlisham] has not done much yet [to mend MAHB’s relations with AirAsia], but we have spent hours talking and he gets what we need. Now, he needs to change MAHB’s monopolistic culture to one of servicing customers,” Fernandes says in a text message. He declines, however, to elaborate on what demands or requests AirAsia have made to MAHB.

AirAsia’s passenger count increased from 6.29 million in 2005 to 42.6 million in 2013. Long-haul sister airline AirAsia X Bhd carried 10 million passengers in the same year.

Badlisham says MAHB has an internal target of growing its passenger numbers to 83 million this year, which is just 4.2% higher than last year’s 79.59 million. It saw an 18.4% growth from 2012.

“Much of the growth will come from AirAsia,” he says, adding that the budget carrier has now become the preferred choice for people from different economic strata.

He is aware that the aviation industry’s growth correlates with the economic numbers. As national carrier MAS’s impending restructuring will see the cutting of some long-haul routes, Badlisham says MAHB has been in talks with many other airlines to fill the gap immediately.

Meanwhile, MAHB’s share price has fallen 18.03% since Badlisham came into office on June 23 to RM6.69 last Friday on general market weakness and concerns of a cash call as the airport operator ponders whether to exercise its right of first refusal (ROFR) for a 40% stake in Sabiha Gokcen Airport (ISG) in Istanbul, Turkey, thereby increasing its stake to 100% from 60% now.

However, Badlisham is unfazed. “Share prices move daily. My job is to make sure that this company is on a strong footing and, of course, has the opportunity to grow in the future. That will certainly help the valuation and the share price,” he says.

He hints that MAHB might do a cash call to fund the purchase of ISG, but the group is mindful of maintaining its AAA credit rating. Analysts say this move will shave its earnings per share. Nonetheless, Badlisham says ISG’s passenger growth is tremendous, thus it is an attractive asset to acquire.

“Our fundamentals are strong in terms of whatever options we may choose. We went to the market for sukuk and that was well received. The company’s policy has always been to maintain its triple-A rating and dividend policy.

 “We may go to the market. The beauty is we have all the options available and we recognise what we want to preserve. We will wait for the board to announce it to Bursa,” he says.

 “I have made three visits to Turkey in my three months here [at MAHB]. It signifies the importance of the 60% stake we have in ISG. Growth and opportunities are certainly there.”

As for his relationship with his predecessor Bashir, Badlisham says: “He is an adviser of MAHB. I constantly see him. We have a great working relationship. He is still active in the industry. He has a wealth of knowledge that I consult him on and he also advises the board. I have no problems [with him].”

This article first appeared in The Edge Malaysia Weekly, on October 20 - 26, 2014.