(From left) Malaysia Airports Holdings Bhd (MAHB) acting group chief executive officer Mohamed Rastam Shahrom, Ministry of Transport secretary general Datuk Jana Santhiran Muniayan, Minister Anthony Loke Siew Fook, MAHB chairman Tan Sri Datuk Zainun Ali, and Lands and Mines director general Datuk Muhammad Azmi Mohd Zain at the signing ceremony on Monday.

The new OAs allow MAHB to channel half of its passenger service charge (PSC) to the ADF, and both the airport operator and the government will review the user fee percentage on a three-year cycle.

SEPANG (March 18): Malaysia Airports Holdings Bhd (MAHB) and the government on Monday signed new operating and land lease agreements that extend the airport operator’s concession to manage 39 airports in the country to Feb 11, 2069, from 2034 previously.

The new OAs, which replace the ones signed on Feb 12, 2009, are for the Kuala Lumpur International Airport (KLIA) and designated airports aimed at ensuring sustainable growth and better services, said MAHB in a statement.

The new OAs offer MAHB “flexibility” to pursue strategic investments needed, including partnering with any external parties to improve capacity, facilities and infrastructure of the airports, the company noted.

“With favourable commercial terms and a transparent investment return mechanism, these agreements foster a balanced and sustainable development path for the group and its airport network, which plays a vital role as an economic development catalyst for Malaysia,” said MAHB.

Under the new OAs, MAHB is allowed to undertake development capital expenditure (capex) apart from the government, and the capex recovery model can be done through various measures, including the airport development fund (ADF), project financing from the capital market, funds provided by the government or any other bankable financing model agreed between both parties.

Transport Minister Anthony Loke told reporters here that this is applicable to both airport expansion and new airport development.

“Firstly, the ADF will be set up by the Ministry (of Transport). When to collect is dependent on particular projects, so ADF does not collect from all airports; it is only for those airports which are involved in expansion projects,” he said at the press briefing after the signing ceremony.

Notably, under the first OAs, MAHB was required to pay “user fee” to the government for being given the concession to run the airports.

The new OAs allow MAHB to channel half of its passenger service charge (PSC) to the ADF, and both the airport operator and the government will review the user fee percentage on a three-year cycle.

Loke also said that lack of development funding is one of the biggest hurdles and challenges to upgrade the Malaysian airports network, which requires consent from the Ministry of Finance and the Ministry of Economy.

“Not every year will we get allocation for airports upgrading, and there are many smaller airports which need to be upgraded periodically, and there are also airports in Sabah and Sarawak which have a lot of potential but they are under capacity right now.

“We need to upgrade them as fast as possible, as much as possible, so that we can tap into the tourism potential. With these new OAs, it gives us more flexibility to talk to MAHB and they can fund some of these projects based on the investment recovery model; this is one of the major salient points in these OAs,” he said.

MAHB chairman Tan Sri Zainun Ali, in her speech, assured that the new OAs will benefit Malaysians in general, as the level of service at the airports can be improved. In addition, she said the investor-friendly terms will act as a catalyst in attracting investors.

“This will further increase the value of MAHB shares and directly benefit the Malaysian government as the main shareholder, as well as the government’s investment funds, such as the EPF (Employees Provident Fund), PNB (Permodalan Nasional Bhd) and KWAP (Retirement Fund (Incorporated)),” she added.

MAHB runs Terminal 1 of KLIA, which is the country’s main international gateway, and the adjacent Terminal 2 (KLIA2), which is the home base of budget airline AirAsia Group; as well as over three dozen smaller airports in the country.

The existing OAs were signed in February 2009, which are effective for 25 years until Feb 11, 2034.

On April 12, 2019, MAHB announced that the Cabinet had approved the extension of MAHB’s concession to operate 39 airports in the country from 2034 to 2069.