What about SLA with passengers and minority shareholders?

The ‘rebellion’ that AirAsia CEO Tony Fernandes attempted to get his passengers up at arms against Malaysia Airports (MAHB) moved into a new phase. He called for a media conference claiming for ignorance and denials, especially in demand of the baggages handling system and lounge. In something else, over qualified to give opinion where the airport shouldn’t be built.

Tuesday December 6, 2011

New twist to AirAsia-MAHB feud over KLIA2

By B.K. SIDHU

bksidhu@thestar.com.my

PETALING JAYA: The spat between airport operator Malaysia Airports Holdings Bhd (MAHB) and low-cost carrier AirAsia Bhd has reached a stage where both parties were showing documents to prove their case over the controversial upgrade of the low-cost air terminal KLIA2.

AirAsia issued a press statement to refute claims made by MAHB that it had asked for a bigger airport and said it should not be blamed for the cost of constructing KLIA2 which had nearly doubled from RM2bil to RM3.9bil.

The low-cost carrier said that its chairman Datuk Abdul Aziz Bakar had in November 2009, via a letter, warned MAHB that the current site of KLIA2 was unsuitable and would cause construction cost to soar.

“The site will definitely be more expensive than the planned budget of RM2bil. AirAsia had also estimated for MAHB that the construction cost would increase to between RM3.6bil and RM3.9bil,” it said in a statement yesterday as it wanted to clarify some of the claims made by the airport operator.

Controversial terminal: The completion deadline for KLIA2 is delayed by six months because of the dispute over the fully-automated baggage handling system. – Bernama

AirAsia is also calling for a press conference today on the issue.

Last Tuesday, MAHB announced it was building a bigger airport to cater for the bullish passenger growth projections made by its biggest client, AirAsia.

As a result, the cost of KLIA2 hasgone up and passenger capacity rose to 45 million from 30 million.

The completion deadline was also delayed by six months to April 2013 because AirAsia wanted a fully-automated baggage handling system (BHS) and the request for it was only made in June.

AirAsia boss Tan Sri Tony Fernandes had rubbished MAHB’s justifications for doubling the cost of KLIA2.

AirAsia had also posted a letter from AirAsia X chairman to MAHB saying that it didn’t know that KLIA2 was planned for 45 million passengers and it was only informed of the 30 million figure.

“This figure has never been officially changed by AirAsia or MAHB since Aug 9, 2011,” the low-cost carrier claimed.

The rebuttal by AirAsia came a day after MAHB posted documents on its website entitled “Why KLIA2 has to be bigger” last Friday that showed AirAsia’s passenger growth estimates and that the airline expected to carry 30 million passengers by 2015/16. Hence, the justification by MAHB to build a bigger airport to cater for that growth was crucial.

In a counter claim to AirAsia’s statement, MAHB said last night that “47 meetings had been held between MAHB and AirAsia since April 2010 until now to discuss and address all of AirAsia’s requirements.

“A workshop with all stakeholders including AirAsia was also held in September 2009 where the Needs Statement for KLIA2 was formulated.”

The request for a fully-automated baggage system made by AirAsia in June would push the completion date forward by six months.

AirAsia has denied that it had asked for a fully-automated baggage handling system (BHS).

It cited a letter from AirAsia X chairman to MAHB dated Aug 18 that stated: “AirAsia re-confirmed our request for a semi-automated BHS instead of a fully-automated BHS. “MAHB has unilaterally decided on a fully automated BHS to accommodate 45 million to 60 million passengers which was again, not agreed by AirAsia.”

To counter that, MAHB posted Fernandes’ letter dated June 16 on its website which stated: “our (AirAsia) official response to MAHB is that AirAsia prefers that the BHS system be developed as shown in BSC option 3: dual tilt tray sorter with full connectivity (in short it is a fully-automated BHS).”

The letter added that “because it would be very difficult to implement an expansion to the BHS system within less than five years after opening, this capacity must be in place under phase one system at the onset of completion of the LCCT2 (KLIA2).”

The letter from Fernandes to MAHB cited a meeting held between AirAsia, MAHB and the Transport Ministry whereby the carrier had to decide on the BHS.

The letter also acknowledged a possible delay to the opening of KLIA2 because of the BHS.

On the issue of aerobridges, AirAsia said it did not want them and was told that there would only be ramps installed at KLIA2. However. MAHB decided on Tuesday to install aerobridges “after being pressured by the travelling public to install aerobridges at the new airport.”

On the 4km runway, AirAsia argued that its request for a 3km runway had been according to its original requirement to MAHB, in order to cater for AirAsia X’s wide-body Airbus A330.

AirAsia claimed that it was by chance that it discovered the runway was shorter and asked MAHB to rectify the situation.

“As such, this should not be considered as an additional request or requirement from AirAsia as the original plans have always been to cater for a 3km runway. Therefore, no additional cost should have been incurred,” AirAsia said.

MAHB had maintained that it was AirAsia that wanted a 4km runway.

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As the main user for the new KLIA2 complex and exercising their rights, Fernandes also requested that MAHB provide AirAsia with a Service Level Agreement (SLA). The funny thing is that, for almost ten years AirAsia has been operating under Fernandes when the airliner was ‘liberated’ from DRB Hicom for a mere RM1.00 and got hold of assets worth RM 700 million and then a contract to ferry arm services personnel worth RM 43 million. He never complained about this all this while.

Fernandes has always been wanting an airport of his own. The increased in cost of the new KLIA2 Complex from a much bare original proposal is very good opportunity for him to gun MAHB down for the ulterior motive to gain control and concession of the potentially high profitable terminal and retail complex.

In response to the demand for an SLA, MAHB explained that they have had AirAsia consulted and worked with them all the way on the new KLIA2 Complex. MAHB also indicated its willingness to have an SLA:

Malaysia Airports’ Brief Comments On Issues Raised by AirAsia

Malaysia Airports wishes to provide a brief clarification on some of the issues raised by our partner at its Press Conference held earlier today.

Service Level Agreement (SLA)

Malaysia Airports currently has a Conditions of Use (CoU) agreement with its airlines partners as well as the ground handlers at KLIA. The CoU provides guidance on the use of airport facilities particularly in regard to the safe and secure use of the airport, as well as a schedule of applicable airport charges. This is very much in line with the common industry practice.

In regard to AirAsia’s request for a specific Service Level Agreement (SLA) and its claim of having SLAs at airports abroad, we have indicated our willingness to have an SLA and are awaiting AirAsia’s proposal on the SLA for further study and consideration. We would also like to reiterate that the airport charges, both current and future, are regulated by the Government and the mechanisms for future increases have been clearly defined in our Operating Agreement with the Government.

Site Selection of klia2

The present site for klia2 was selected based on the National Airport Master Plan (NAMP) after a detailed and comprehensive study involving all our stakeholders including Ministry of Transport, Department of Civil Aviation, Ministry of Finance, Ministry of Home Affairs and all airlines including AirAsia.  

Joint Working Committee

The weekly meetings held with AirAsia and other stakeholders serve as a platform for all views and requirements to be discussed and addressed. Most of AirAsia’s requests have been complied with. Only issues which have financial implications are referred to the Board. We will continue to engage AirAsia during the weekly meetings.

It has always been Malaysia Airports’ view that in dealing with our partners, issues raised by either party are best resolved through proper consultation. However, from time to time, we are duty bound to make clarifications so that the public receive accurate information and a balanced perspective.

We hope that with the clarifications made above and over the past week on some of the issues raised, we can now move forward and work together with our partners in ensuring the successful development of klia2 for the good of the country.

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Now that MAHB sorted that out and willing to take ownership on the service they provide to ensure efficiency and comfort primarily for the passengers, we in BigDogDotCom now ask Fernandes the ‘Thirteen Million Plus Ringgit” question; What about the SLA with the passengers?

1. Would AirAsia own up to their service standards?

2. Would AirAsia own up to their efficiency and punctuality?

3. How about compensation for delayed passengers, which include  accommodation sand meal allowances throughout the delay?

4. How about compensation for lost luggages?

5. How about compensation for missed flights (with other connecting airlines, now that the low cost carrier complex (KLIA2) is linked directly to Main Terminal Building KLIA?

6. What about AirAsia passengers’ rights as consumers, especially the “RM 9.99 tickets”?

Passengers have rights too. All these whole passengers’ rights have been denied because the excuse of ‘no frills’ low cost carrier.

More importantly, AirAsia has the exclusive rights for certain sectors in the region. Would the passengers get to file with the upcoming ‘anti monopoly law’ expected to be tabled in Parliament in January 2012 because they are left with no choices and up to the antics of the ‘no frills low cost carrier’, which well known for its timing flaws.

The rest of Malaysians would also like to know, is this Fernandes’s morbid attempt to divert public attention from the on-going investigation which include Parliamentary public accounts committee (PAC) on the ‘share-swap’ deal inked in early August?

There is a strong rumour about Malaysia Airlines being taken private. This would be made possible if Fernandes & co. were to allowed to continue ‘pillage and plunder’ the national carrier, just like the “RM 18 million sponsorship of Queen’s Park Rangers’ home games”.

There are loose talk about Malaysia Airlines to hive off the cargo and engineering services. These are the profitable arms of the national carrier. Without the two, it would make the airline harder to maintain profitability even though cash position is strong. By then, these vultures ever ready to devour on Malaysia Airlines’ carcass would have the freedom and of course justify taking the airline private.

It was also said in abstract, Malaysia Airlines’ senior managers were let in of this eventuality. It is almost like a primary move to psychologically condition them for this much feared move. Then again, until present moment so many question ‘where’s the beef for Malaysia Airlines in the share-swap deal’.

This is probably the extension of one time Binafikir’s ‘Wide Asset Unbundling’ where strategic assets were sold off, for the excuse of reduce borrowings.

Then again, the co-architect of Binafikir’s WAU is now executive director of Malaysia Airlines, Mohd, Rashdan Yusoff. So was Khazanah Holdings managing director Tan Sri Azman Mokhtar. His poor ability to handle (or probably rein the leash on Fernandes for his utter uncouth behaviour as a director of GLC and his incessant barks against another GLC) the matter and what public’s perception of his dereliction of duty against the September ‘plundering of Malaysia Airlines’, has been met by the demand for his resignation or worse still, dismissal from Khazanah.

Fernandes must answer all these. If it is not true about ‘some plan’ to take Malaysia Airlines private, then he must deny it, Now that he is also a director of Malaysia Airlines and give an assurance that the minority interests would be protected.

*updated 1130hrs

In a town hall meeting this morning Malaysia Airlines ED Danny Yusoff told the sernior managers on the part of what has been agreed on comprehensive collaboration framework (CCF), Malaysia Airlines does not fly to where AirAsia is serving and AirAsia would be a feeder to Malaysia Airlines’ selected international routes. However, when asked Danny also told the senior managers’ town hall that they cannot stop AirAsia from going into Malaysia Airlines’ lucrative routes, such as Sydney, because it would be “Against anti trust laws”. Basically, eventually AirAsia could come and take away Malaysia Airline’s routes at their pleasure.

What made most of the senior managers leaving the town hall feeling very dissatisfied and displeased is that Danny as the ED failed to explain the rest of the details of the CCF. They are having the impression that Danny would only want to condition them for things that would eventually benefit AirAsia, at the expense of Malaysia Airlines. This is very demoralising to a group of senior managers and professional airliners who have dedicated majority of the working life for the national carrier.

It was also confirmed that what we rumored last night about where Malaysia Airlines is heading, “Working in progress towards hiving off the engineering services and cargo. We just want to keep our airline simple”. Malaysia Airlines as the national carrier would eventually be an airline operating business, without assets and back up services. Probably the ground services would also be hived off at some point of time.

It is so baffling to the senior managers that these two very important support and complementary services are profitable and have huge potential, to propel Malaysia Airlines forward. Malaysia Airlines would lose its competitiveness as a Tier-1 premium airline without its cargo and engineering services. More over, cargo business has been making hefty profits and it is growing steadily, which include new markets.

Danny also gave an excuse that “We have to build our service standards”. What is baffling is that Malaysia Airlines have been maintaining high and world renown service standards, so why is that they have to sacrifice a lot of what have worked for them as a tier-1 premium airline for the benefit of AirAsia?

The other “Thirteen Million Plus Ringgit” questions;

1. Who would benefit from Malaysia Airlines selling opff the cargo and engineering services?

2. Is this about AirAsia’s preparation to have their own engineering services and cargo operations?

3. Is this the second phase of Danny Yusoff’s and Azman Mokhtar’s WAU?

It is clear that Malaysia Airlines is being cannibalised for the pleasure if AirAsia. It just a question of time when the national carrier’s demise would be made final. With open eyes, Khazanah allowed Malaysia Airlines to be devoured.

The rights of minority shareholders which include long serving Malaysia Airlines long serving and dedicated employees is bleak.