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AWise: Airport Co. Bad Day at the Races
By Andrew Ho

21/3/2001 8:51 pm Wed

[Penswastaan dan perlumbaan adalah dua wawasan Mahathir yang asyik kedengaran terkandas sejak akhir-akhir ini. Berbelanja mega bukan penentu kejayaan, sebaliknya ia hanya akan mempercepatkan kita tumbang kerana berbunganya hutang dan pelanggan yang semakin tidak sudi untuk datang. Banyak negara boleh maju dan laku walaupun tidak membina sesuatu yang mencekik wang saku.

KLIA kini cuma beroperasi dengan kapasiti 2/3 sahaja. Sudah empat syarikat besar kapalterbang menjauhinya. Tiket lumba Sepang pula tidak laku dan cuma 40% terjual. MAB masih kerugian sehingga pelabur sudah naik jeran. Itupun MAB berhasrat untuk berbelanja RM 1 bilion lagi untuk mengubah suai LTAB Subang menjadi pusat lelongan.

MAB kini amat bergantung kepada 3 pelanggan utamanya - Malaysia Airlines (MAS), Singapore Airlines dan Cathay Pacific Airways - mereka menyumbang lebih 67% pendapatan. Tetapi MAS kini sedang tenat berhutang dan rugi RM459 juta pada suku 3Q, dan sedang terbang menjunam untuk mencecah kerugian terBESAR sebanyak RM1 billion pada 2001.

Pendeknya semakin besar semakin ketinggalan..... ini bukannya satu wawasan tetapi satu kesewelan pemikiran. Layakkah ini menjadi satu sukatan pelajaran untuk universiti tempatan?
- Editor

Airport Company Has Bad Day at the Races

By Andrew Ho, AsiaWise

7 Mar 2001 18:00 (GMT +08:00)

When Kuala Lumpur's spanking new international airport was privatized at a cost of 1.3 billion Malaysian ringgit, it was to be the cornerstone of growth for Malaysia Airports Holdings Bhd.

Malaysia's largest privatization gave MAB a superb facility for a fraction of the RM10.7 billion construction bill - and it was payable over five years. On top of that, the country's other airports - four international, 14 domestic and 19 short take-off and landing facilities - were added into MAB's pot at nominal cost. In return, MAB undertook future development of KL International and agreed to upgrade the other airports.

KL International can handle 25 million passengers a year and there's room to grow. Utilization is still less than two thirds what it could be, despite promotions pushing KL as Southeast Asia's gateway and big ticket events, including the Formula One, aimed at improving traffic and economies of scale.

Apart from traditional airport operations, MAB's earnings come from Formula One venue Sepang International Circuit, duty free shops located at its international airports, legacy income from oil palm plantations and hotel revenue.

When MAB debuted on the Kuala Lumpur Stock Exchange in December 1999, the counter was a hit, closing at a 24% premium to its RM2.50 start-up price its first day of trading. With the sweet privatization deal and promising fundamentals, the market consensus put MAB's fair value somewhere between RM3.50 and RM4.00 on a discounted cash flow basis.

Not everyone was convinced. The bears cited gateway competition from Changi in Singapore, Dong Muang in Bangkok and Chek Lap Kok in Hong Kong. Management's lack of focus was also a concern - hosting Formula One could end up being not a prize, analysts worried, but a major distraction. And cash flows were also a concern, given capex needs for upgrading KL International and other airports.

MAB's allure essentially ended with its IPO. Results for 2000 shocked - net profit slumped 54% year-on-year. More disturbing still, MAB missed its net profit forecast of RM210 million by a whopping 40% - this despite 11% and 22% increases in passenger and cargo traffic respectively, at KL.

What happened? The Formula One happened and promptly rang up a RM23 million loss. Then the hotels lost money and on top of everything else, the airports ran up unanticipated operating costs. MAB's loss at the races prompted it to ask the government to effectively subsidize the event by pegging all USD expenses at RM2.50 - when it takes RM3.80 to buy a buck. To top off MAB's sad story, 60% of Formula One tickets are still unsold with the start of this season's second leg less than two weeks away.

Stripping out other income, airport operations recorded a dismal pretax profit of between RM5 million and RM7 million for 4Q2000. The total net loss for the fourth quarter of 2000 was RM17.9 million.

Cracks started appearing on KL's runway even before the IPO. Lufthansa stopped all passenger flights in September 1999 and Qantas followed last April, suspending flights after consolidating services with shareholder British Airways. Then BA announced it would suspend flights beginning this April. All Nippon Airways is getting out completely later this month after cutting back to five runs a week last March.

MAB and the Minister of Transport contend the cuts are insignificant. Walter Culas, chairman of the Airfreight Forwarders Association of Malaysia, disagrees: "The matter is of great concern as it could have an adverse effect on the industry as well as the country in the long run if airlines are pulling out.''

Currently Malaysia Airlines (MAS), Singapore Airlines and Cathay Pacific Airways, MAB's three top customers, contribute over 67% of airport revenue. MAS is struggling as it is. It reported a net loss of RM459 million for 3Q, and is on the way to an anticipated net loss of RM1 billion in 2001.

To add to investor's concerns, MAB recently announced a RM1 billion plan for the old terminal at Subang. It will be redeveloped into an Asia Pacific Auction Center (APAC), which won't be ready for three or four years.

With dismal results and deteriorating financials, only eight securities houses bother to provide earnings forecasts for MAB these days. To compound matters, the company has been looking to place shares with foreign investors. Some 200 million have been earmarked for foreign institutions but there are few takers. At RM1.66, MAB is trading at a 34% discount from its IPO price and it will be a while before the tower clears this lumbering bird for takeoff - it's still trying to find the taxiway