The case for competition in running airports

AUG 10 — It is remarkable that even though flying is part of our lives and no longer a privilege of the rich, we are stuck with only one company running all airports except the Senai International Airport in Johor Baru.

Malaysia Airports Holdings Bhd (MAHB) — a government-linked corporation under Khazanah Nasional Berhad — runs 39 out of 40 airports and smaller airfields throughout the country.

The absolute lack of competition means that any passenger service charge (PSC) can be imposed on passengers, as well as any landing and parking fees and ancillary charges on airlines, since we don’t have other airports to choose from.

After much lobbying by MAHB for the PSC to be equalised between the Kuala Lumpur International Airport (KLIA) and Kuala Lumpur International Airport 2 (klia2), the Malaysian Aviation Commission (Mavcom) raised the PSC rate this year for travellers using klia2 to fly to places beyond Asean from RM50 to RM73, the same rate as other airports in the country.

The PSC is meant to cover the costs for use of terminal facilities. Why should passengers pay the same rate to use a crappy airport as a nicer one with better facilities? Even though klia2 is supposedly not a low-cost hub, it feels like the airport version of a dirty and crowded market. The airport lacks seats and one has to walk for what seems like miles to get to their gate.

Malaysia Airlines, a full-service carrier, does not operate any flights from klia2 that is dominated by AirAsia, a low-cost airline.

So why can’t a low-cost airline get a no-frills airport with a lower PSC rate and other charges?

KLIA’s ranking in Skytrax’s list of the world’s top 100 airports reportedly dropped to 34 in 2017 from 24 in 2016. The Malaysian airport was ranked eighth in 2012. Singapore’s Changi airport, on the other hand, has retained its top spot since 2013.

According to a 2016 paper by Louis van der Werff on European Union financing for regional airports, regional airports in Europe compete with each other and with main airport hubs to attract low-cost carriers by offering the lowest landing fees or handling charges.

Werff also noted that low-cost carriers perceived regional airports, or “secondary” airports compared to main transport hubs, as having other benefits like faster turn-around times due to less air traffic congestion.

Low-cost carriers want cost efficiencies in every area. AirAsia, for example, does a 25-minute turnaround, which means that from the moment the aircraft comes to a complete stop, it only has 25 minutes to disembark passengers, clean the plane, load baggage, load food and merchandise, fuel up, and get the next set of passengers onboard and seated for its next flight.

Land prices would also typically be lower in secondary airports as they are usually located in a remote area, which means lower operational costs and cheaper infrastructure and services like carparks, according to Werff.

Werff wrote that secondary airports attract low-cost carriers with low operational charges because they are subsidised by local authorities hoping that such airports would bring development, stimulate tourism, and create jobs.

In the Malaysia Baharu that supposedly tries to do things differently, we should allow new airport operators to enter the market instead of letting MAHB continue its monopoly.

Competition is always good. It forces businesses to produce better goods and services, which ultimately benefits consumers.

A monopoly allows a business to set whatever price it likes and lets it get away with poor quality products, simply because people have no choice but to use it.

Competition tests the true worth of a business.

It is the market, not the government, which should decide whether businesses fail or succeed.

*This is the personal opinion of the columnist.

You May Also Like

Related Articles