AirAsia faces controversy over plans for own airport

By Nicholas Ionides

Controversy is brewing in Malaysia over a new airport that looks set to be built for the capital Kuala Lumpur by budget carrier AirAsia and government-linked conglomerate Sime Darby.

In December it was quietly revealed that the government had given approval for AirAsia and Sime Darby to build the new single-runway airport at an area called Labu, not far from the existing flagship Kuala Lumpur International Airport. It will be built on land owned by Sime Darby and the passenger terminal will be managed by AirAsia, which is expected to be the sole operator from it.

State-owned Malaysia Airports, which runs KLIA, is lobbying to stop the new facility from being built. It built a terminal specifically for use by low-cost carriers at KLIA in 2006 and has been proposing to build a much bigger new budget terminal at KLIA.

While Malaysia Airports has been lobbying behind the scenes, other opponents have been going public. Among them is former prime minister Mahathir Mohamad, who has loudly complained about the new airport, saying it is not necessary as there is ample room for expansion at KLIA.

After initially maintaining silence over the project, AirAsia is now defending its plans, blaming the need for the new Labu airport on Malaysia Airports' indecision over when a new budget terminal may be built at KLIA.

Group chief executive Tony Fernandes told local media that plans for the new airport were borne out of "our fear of MAHB's inability to build a terminal in time", and cites frustration at delays to development plans for KLIA.

He added that "we can't afford a delay because a lot of our planes have been bought. We definitely need a bigger place." He says the new airport, to be known as KLIA East@Labu, should be ready for operation early in 2011.

© Reed Business Information 2009

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