State govt proposes to take over Melaka airport from MAHB

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KUCHING: The recent proposal by the government to takeover Melaka Airport from Malaysia Airports Holdings Bhd (MAHB) may help to further reduce the company’s operational costs but the financial impact will only be seen at a later date.To note, Melaka government had recently expressed interest in taking over the management of the new RM190 million international airport terminal in Batu Berendam. Chief Minister Datuk Ali Rustam said the government and its partner, Senai Airport Terminal Services Sdn Bhd had forwarded the offer to the present operator, MAHB.

OSK Research Sdn Bhd (OSK Research) in its research report said the joint takeover plan had been submitted to the Economic Planning Unit that had in return asked both parties to negotiate with MAHB to reach an agreement

The old Melaka Airport, which recorded about 50,000 passengers a year, was in a loss making situation. Despite the fact that the new airport was undergoing an expansion and would soon be upgraded to an international airport, it would take a while before its annual passenger figures cross the one million mark or becomes operationally profitable.

Therefore, the Chief Minister’s request to lower the airport tax may also be well compensated by the government under the new operating agreement, which clearly differentiates MAHB’s socio-economic role from commercial accountability.

To recap, the new terminal could accommodate up to 1.5 million passengers a year compared with the old terminal, which could only handle 300,000 passengers per annum. The upgraded runway would allow Boeing 737 and Airbus A320 aircrafts to take off but only one international route to Riau, Indonesia was recorded at the moment, the research firm added.

As Melaka had joined the World Heritage List of the United Nation Educational, Scientific and Cultural Organisation (Unesco) since 2008, the historical state would attract more leisure travellers in the longer term and in turn boost the air passenger numbers.

However, with an annual capacity of only 1.5 million passengers compared with the near 50 million passengers handled by MAHB, the financial losses may be limited despite the bright long-term prospects.

Notwithstanding the current factors, OSK Research pegged the fair value at RM4.22 per share based on 16 times financial year 2010 earnings per share.