The low-cost phenomenon has had such an impact on Kuala Lumpur International Airport that Malaysia’s capital city gateway will open a dedicated new $1.2 billion terminal next year to ensure that it is able to keep pace with demand.
Being built to replace the existing Low Cost Carrier Terminal (LCCT), klia2 will be capable of accommodating up to 45 million passengers per annum and, according to operator Malaysia Airports Holdings Berhad (MAHB), offer “superior facilities” for low-cost carrier (LCC) passengers, which now account for 45% of its traffic.
The new levels of “comfort and convenience” for LCC passengers include airbridges, a fully automated baggage handling system – which means that passengers no longer have to wait for their bags to be security screened at check-in – and, a host of retail and F&B outlets that were left out of the existing budget terminal at the request of AirAsia and other LCCs.
It will have a multi-modal transportation hub for buses, taxis, and an Express Rail Link (ERL) train to ensure improved connectivity for passengers.
The desire for klia2 to be a environmentally friendly both in terms of its design and construction and operation, means that the terminal will contain a number of ‘green’ features that MAHB hopes will earn it Leadership in Energy and Environment (LEED) certification and Silver certification from the Malaysia Green Building Index (GBI).
Located two kilometres from the main passenger terminal at Kuala Lumpur International Airport (KLIA), klia2 will ultimately be equipped with 96 check-in desks and parking positions for up to 68 aircraft.
And, unlike the existing low-cost carrier terminal, klia2 is actually being designed to handle transfer traffic and will be much bigger and more fancy than the existing facility.
Indeed, with a floor area of close to 260,000sqm comprising a three-storey main passenger terminal (MTB) and a satellite building, it will dwarf today’s 60,000sqm Low Cost Carrier Terminal (LCCT).
Its bigger size and greater capacity than originally planned – it was initially being built to handle 30mppa – in addition to a range of newly added features such as the airbridges, however, mean that the terminal will now open a year later than planned and cost $300,000 more than previously anticipated.
But MAHB’s managing director and CEO, Tan Sri Bashir Ahmad Abdul Majid, believes that it will be worth the wait. He enthuses: “Quite simply, when fully built, it will be the biggest and best purpose built terminal for low-cost carriers in the world.”
As a result of the upgrade, klia2 is now expected to open in April 2013, a little more than three years since Malaysian Prime Minister, Dato’ Seri Mohd Najib Tun Abdul Razak officiated at the groundbreaking ceremony.
Emergence of the LCCs
Despite accounting for close to 50% of all passengers handled in Kuala Lumpur today, low-cost carrier (LCC) travel is still a relatively new experience for Malaysia and its leading airport.
For as recently as 2001, KLIA was a low-cost carrier free zone, and few took much notice when AirAsia launched flights out of the Malaysian capital in early 2002.
And why would they have? Former Time Warner executive, Tony Fernandes, had bought the heavily indebted airline for one ringgit – the equivalent of around 30 cents – in December 2001, and its future looked far from certain.
Indeed, MAHB’s Bashir admits that there was no indication that AirAsia would become the success story that it is today.
His opinion, however, was somewhat influenced by the fact that Fernandes told him in mid-2002 that AirAsia had no plans to operate internationally or have interline agreements with other airlines.
Less than a year later it launched its first international service to Bangkok, and extraordinary growth since means that AirAsia now operates hundreds of daily flights across the globe.
The total – operated between AirAsia and its subsidiaries that include long-haul LCC AirAsia X – ensure that AirAsia is one of the biggest carriers in the Asia-Pacific region.
The unexpected situation meant that Kuala Lumpur’s $35 million LCCT, only opened in March 2006, began struggling to meet demand as early as 2008.
The moral of this story, according to Bashir, is that airline business models change and that it is vital that airports take this into account when planning new infrastructure.
He is also brave enough to admit that the airport possibly got it wrong by focusing its infrastructure development strategy too much around the needs of one airline business model when it built the current LCCT.
“The dramatic change in AirAsia’s business model only goes to show just how much things can change in a comparatively short space of time,” notes Bashir.
“For this reason, airports cannot afford to totally depend on the view of airlines when planning future infrastructure, as who knows what business model they may have in five years’ time.
“We made the mistake of concentrating too much on the needs of one airline, AirAsia, especially in the design of the Low Cost Carrier Terminal, which is now no longer adequate for our needs. Its baggage handling system is too simple for the traffic it is handling, for example, and its 15 million passenger per annum capacity is not enough.
“We simply never anticipated that Kuala Lumpur would become the low-cost carrier hub that it is today.”
And with LCC flights expected to account for close to 30mppa within a few years, the need to enhance capacity to ensure that the airport is equipped to meet demand is obvious.
Dedicated LCC terminals
But why do LCCs need their own terminal? “The different business models mean that the requirements of the legacy carriers are quite different to the LCCs, with the latter invariably wanting no charges at all or costs kept to a minimum, and in certain cases a dedicated ‘no-frills’ low-cost carrier terminal is the best way to provide this service,” says Bashir.
“It isn’t always the answer, though, and some airports don’t have the space for such a facility. We won’t be building any more LCCTs in Malaysia, for example, as the existing terminals at other airports can still accommodate the growth.”
Bashir, however, has no doubt that dedicated facilities for Kuala Lumpur’s legacy and low-cost carriers is the best solution for both the airlines serving the Malaysian capital and their customers.
“We knew that we needed a dedicated terminal for low-cost carriers when it became apparent that AirAsia’s growth at KLIA was being stifled by operating out of the main passenger terminal. However, as we were not sure how successful it would be, we opted to play safe and build a temporary terminal and see how things went.
“The rest, as they say, is history as we now have the world’s best LCC and need to provide them with new facilities to ensure that they continue to flourish and grow at KLIA.”
Flexible business strategies
If KLIA has reasons to be grateful to AirAsia, Bashir is certainly not shy in pointing out that the airport has played a major role in the low-cost carrier’s development and growth.
“I would in fact go as far to say that AirAsia would not be the success story it is today if it wasn’t for our decision to build the current LCCT and the air service agreements signed by the Malaysian government,” says Bashir.
“We are in a good place right now, but it has not been a smooth journey. AirAsia changed its business model and we had to change our mindset and business model to accommodate them.
“The experience has shown me that we need to remain flexible and agile in the way we operate as the aviation industry is constantly evolving.”
With AirAsia predicting that it could be handling 45.3mppa by 2020 and up to 60.3mppa by 2025, there is little doubt that MAHB will have plenty more opportunities to show its flexibility in the years ahead.