PM is right in rejecting Kulim airport proposal

THE northern region – Perlis, Kedah, Penang and northern Perak – does not need two international airports.

The northern four states are sufficiently served by the Penang International Airport (PIA) as an international gateway for the northern region, and Alor Setar airport a domestic air link for Kedah/Perlis and Langkawi as a tourist airport.

It is indeed a waste of public funds to spend on another international airport within a distance of less than 100km radius from the current serving airport, PIA.

By the way, there is another international airport at Betong on the Thai side, that Kedah folk can use for their non-domestic flights, in case they do not wish to use PIA whenever they want to fly to Bangkok or elsewhere directly.

Private sector funding

The claim by Kedah Menteri Besar Muhammad Sanusi Md Nor that Kulim airport is to be funded by the private sector does not hold water and most definitely does not make any economic sense.

In the first place, the proposed international airport at Kulim must, first and foremost, be commercially viable in order for it to be financially viable.

In this case, the commercial viability has not been proven and established.

The estimated number of aircraft arrivals per day and the estimated number of passengers (and cargo tonnage) have not been shown at all.

Without commercial data, the financial feasibility cannot be calculated, justified and established in order to show the potential returns on capital cost or investment.

Without solid numbers, no right-minded corporate sector investor would be willing to undertake the project, as it would be deemed not financially viable.

When a capital intensive project like Kulim airport is not expected to produce a good return on investment (ROI) for the capital deployed, interests and financial charges, it is foolhardy to expect any financier to sink in any amount of funds for the project, just to support the interests of a corporate sector client and the unrealistic ambition of a local politician.

As a subject-matter expert, I cannot see how a positive ROI for Kulim airport could be achieved as passenger and cargo demands may not be there in the first place.

No private sector company would invest in building a new international airport when the potential revenue is low and profit margin is negative.

Serving who?

Where are the passengers going to come from? Where is the cargo base?

The population of Kedah is only about 2 million while Penang has about 1.78 million residents.

A combined population of fewer than 4 million people cannot justify the construction of another new international airport.

For a better understanding on airport planning, income generation from airport operations can be categorised into two parts:

i. Aeronautical income, such as landing charges, parking charges and aircraft services. (These are derived from the number of aircraft landings daily and the type of aircraft deployed, projected annually.)

ii. Non-aeronautical income, such as passenger airport tax, rental of airport premises, advertising, logistics and transportation services including vehicles parking charges. (These are derived from the number of passengers and cargoes daily and projected on a yearly basis).

In best case scenario for Kulim airport, the combination of parts i. and ii. above may not be sufficient to cover the costs of:

a. Acquiring the land, on which the airport is to be built.

b. Construction costs incurred for the airport runway, taxiway, terminal buildings, roads and other facilities at Kulim airport.

In other words, the economics will not work, as the costs of land acquisition and the costs of construction will be much higher than the expected revenue.

Therefore, the Malaysian PM has a valid reason and has made the right decision not to give the go ahead with Kulim airport. – March 1, 2023.

* Rosli Khan reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.

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