HLIB: AirAsia’s absence at klia2 may benefit rivals

PETALING JAYA: Low-cost carriers may benefit from first-mover advantages at the new Kuala Lumpur International Airport 2 (klia2) if AirAsia Group remains at the Low-Cost Carrier Terminal (LCCT) in Sepang for a long period, said Hong Leong Investment Bank Research (HLIB Research).
"Should AirAsia insist on staying at the LCCT for a long period, other low-cost carriers may take advantage of the situation and add capacity aggressively (new routes and additional frequencies to existing routes) in from klia2 (in direct competition with AirAsia Group)," it said in a research note yesterday.
The other low-cost carriers may also try to hog the preferred time slots in klia2 before AirAsia moves in, it said.
The authorities have said that klia2 is on track to start operations on May 2, replacing the LCCT which will be closed on May 9 and four major low-cost carriers namely Malindo Air, Cebu Pacific, Tiger Airways and Mandala Air, have confirmed their transfer to klia2 by May 2.
However, AirAsia has said that it will remain in LCCT despite its closure on May 9, adding that it will not move to the new airport until all issues are addressed.
Issues raised by the group include depressions and cracks on the taxiway, apron and runway as well as the potential higher passenger charges in klia2.
"We believe Malaysia Airports Holdings Bhd (MAHB) will push through the operation commencement of klia2 on May 2, despite possible shortcomings of klia2. MAHB is likely to continue rectifying the disputed shortcomings after the official launch.
"However, we do not expect AirAsia to stay long in LCCT, given the group will be disadvantaged against other low-cost carriers which operate from klia2. After all, klia2 promises better and more offerings (products and services), facilities and conveniences to air travelers," said HLIB Research.
MAHB may extend the contract period for retailers at the LCCT, depending on AirAsia's transfer, while retailers at klia2 remain on schedule for the May 2 opening.
AirAsia's decision to remain at the LCCT is not expected to significantly affect MAHB as the airport operator will earn non-aeronautical revenue (rentals, royalties, retails, advertising and car parks) from both klia2 and the LCCT, as passengers will still spend regardless of terminal.
"However, MAHB may grant rental discounts to the retailers in klia2, given the potentially lower traffic flow."
HLIB Research maintained its neutral call on the aviation industry with positive factors being strong growth in passenger movements and Asean's open sky policy while negative factors include high jet fuel cost and yield pressures due to overwhelming capacity growth.