By Stephanie Jacob
With Malaysia Airports Holdings Bhd not conceding to the claims put forth by AirAsia Bhd in its RM409 million letter of demand, the battle between them looks likely to continue. But who, if either, has a stronger case and what happens next?
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On Aug 11, 2015, a stack of pictures taken in klia2 were made available to KINIBIZ, said to be taken just the week before on Aug 6. The pictures showed cracks, uneven surfaces, and instances of significant ponding due to the depressions caused by the ongoing differential settlement of the airport.
The pictures lent visual proof to what has become klia2’s biggest issue: the differential settlement of the ground on which the airport sits, which is the crux of klia2’s problems.
What it basically means is that the ground on which the airport is built (including the terminal building, the apron, taxiways, etc) is settling at a varied pace which causes the cracks and depressions. It has also become the basis for the ongoing verbal battle between Malaysia Airports Holdings Bhd (MAHB) and AirAsia Bhd.
AirAsia has gone as far as suggesting that klia2 should never have been allowed to open before the settlement issue was dealt with. The airline has said that the issue has had a significant impact on its ability to run its operations smoothly.
Unsurprisingly, MAHB has disagreed with the assessment, and said that AirAsia is scapegoating a perfectly-usable airport for its personal agenda.
‘Cracks do not jeopardise klia2 safety’
According to MAHB, the reason the settlement happens at a different pace is because some areas have been built on piling while others have not.
“The cracks and depression happen because some structures like the terminal building, fuel pipeline, and drains are on piling, while the pavement at taxiways and apron parking bays are not on piling,” explained a MAHB spokesperson. ”The structures on piling do not settle, however, the surrounding areas which not on piling will. This causes the differential settlement that resulted in the depression and cracks.”
However, the spokesperson emphasised to KINIBIZ that “these are surficial cracks and they do not jeopardise the safety of the terminal, apron, and taxiway operations”.
MAHB’s spokesperson said the cracks and depression are dealt with as they emerge and while although these works sometimes require aircraft parking bays to be closed, there are more than enough bays to accommodate the needs of all the airlines which fly out of klia2.
In response to AirAsia Bhd’s demands that a more long-term solution be found, the spokesperson noted that the airport is less than two years into its operations and that MAHB has always indicated that it would take about five years for the differential settlement process to stabilise.
Nonetheless, the MAHB spokesperson said steps are being taken to slow the rate of settlement.
“In addition to continuously resurfacing the depressed areas and repairing the cracks to maintain the condition within the tolerance level in accordance to International Civil Aviation Organisation safety standards, we are strengthening the apron and taxiway pavements by placing the concrete slabs and the polyurethane compound in order to reduce the rate of settlement at the non-piled areas. This solution will minimise the differential settlement and the occurrence of cracks over time,” she explained.
The spokesperson added the level of differential settlement was constantly being monitored by the Department of Civil Aviation (DCA), which is the regulatory body in charge, and that the DCA has consistently found the issues to be within tolerable safety levels.
“The joint inspection committee, which comprises MAHB, DCA, AirAsia, AirAsia X, and Malindo, jointly discuss and agree on the rectification works schedule, as well as inspect the completed works to ensure it complies to the safety standards set by the authority,” she said.
From an airport user’s point of view, this is important because the dangers of air travel are not limited to when an aircraft is airborne. They are safety considerations when the aircraft is taking off, landing, and during the embarking and disembarking of passengers.
Furthermore, with large amount of people coming and going through the airport, the structural integrity of the entire area must be ensured.
But meeting the minimum or tolerable level of airport safety does not mean that it presents no complications for both passengers and also for the airlines which use it as its base or hub to fly out of.
And that is perhaps AirAsia’s biggest point of contention with the airport – it does not dispute that it works but takes issue with how well it functions.
To recap, the airline has had issues with the airport even before it started operating out of it, with a possible turning point being when it was decided that klia2 should be a hybrid airport rather than a low-cost one. One of AirAsia main grouses is the that the terminal, which was slated to be primarily used by low-cost carriers, was not customised to suit its business model.
For example, the airline was unhappy that it was forced to use aerobridges in klia2 as it raised the airline’s cost, which then had to either be absorbed or passed on to its customers, neither option of which was palatable to AirAsia.
MAHB, however, has said that many of the facilities which AirAsia does not want are popular among travellers. It also pointed out that all the other low-cost airlines also have to use the aerobridges, for example, and noted that they do so willingly.
‘We never wanted to move’
When it was decided that klia2 would be opened on May 2, 2014, AirAsia was adamant in not wanting to make the move. However, it eventually bowed to pressure and agreed to move a week later on May 9.
Tony Fernandes
But this was not without its management making it quite clear that it did not believe the airport was ready, a fact AirAsia’s founder and group chief executive officer (CEO) Tony Fernandes has been keen to reiterate recently when he said: “We never wanted to move… I had been very public about it (the construction defects) for a long time and most did not support me… Now look at the situation. I am very frustrated when I walk into the airport because there is still so much work being done.”
Nonetheless, the airline’s testy relationship with the airport operator pre-dates klia2 issues.
The two have often disagreed on where AirAsia should operate out of and with MAHB having a monopoly over the airports in Malaysia (it owns all but one in Senai, Johor). The airline has often felt bullied, both over klia2 and more recently over MAHB’s demand that all airlines operate out of Terminal 1 of the Kota Kinabalu International Airport (KKIA).
In the airline’s early days, Fernandes was a proponent of operating out of the old Subang international airport. When he was denied permission to move to Subang, he decided that AirAsia would build its own airport in Labu, Seremban to accommodate its growing operations. However, those plans fell through after it failed to gain government approval.
Instead, AirAsia was made to operate out of the low-cost carrier terminal (LCCT) while klia2 was constructed. Given the multiple delays (which AirAsia also contributed to by asking for changes), the LCCT quickly ran out of space to accommodate the airline’s growing passenger numbers.
Nonetheless, klia2 could have been a solution, had MAHB taken AirAsia’s views into account, said the airline’s management. However, this did not happen because MAHB refused to heed AirAsia’s advice, it said.
Fernandes and Malaysia AirAsia’s CEO Aireen Omar have asserted that, instead of benefiting the airline, the move to klia2 has hit the airline’s bottom line because of higher costs it incurs to fly out of it.
This claim is part of the RM409 million letter of demand (LOD) it sent to MAHB at the end of July 2015. The LOD accuses MAHB of having failed or breached its contractual duties and duty of care, causing the airline to suffer losses.
The losses here are primarily those stemming from the additional wear and tear on AirAsia’s aircraft due to the depression and cracks which have been caused by the differential settlement.
Aireen Omar
In an interview with The Malaysian Insider in early August, Aireen said: “Our expenditure has also increased significantly because we need to cover the damages that we are facing. The airport is not ideal and we need to think of various ways to manage our business.”
“We are also forced to use a check-in system, which has a very high cost, compared to using our own system. Additionally, there are expenses incurred from maintenance and we have to improve the aircraft’s fuel consumption because the design of the airport is causing damage,” she added.
Aireen said the airline has been keeping a close tab of the additional costs incurred as a result of klia2 failings and emphasised that the actual amount is actually much more than the RM409 million figure.
‘AirAsia has seen growth from klia2’
In its response to the LOD, MAHB said: “The claims made by AirAsia Bhd are wholly unjustified and unsupported by any particulars, and that the facts relied upon by AirAsia Bhd to support its claims are misleading and tainted with factual inaccuracies.”
Rather, in response to questions from KINIBIZ, MAHB’s spokesperson said: “klia2 handles an average of 500 flights daily which is 20% more than at LCCT previously. This shows that low-cost airlines particularly Air Asia have enjoyed growth at klia2.”
“The LOD came as a surprise to us and for the claims to come from LCCT (from when AirAsia was operating out of LCCT)? That does not make sense because AirAsia has grown,” she added.
AirAsia’s claims that they were being bullied over klia2 and moving to Terminal 1 of KKIA were also rubbished by MAHB’s spokesperson.
“We have so many airlines operating out of these airports, why is it only AirAsia who feels bullied? And now they are saying they do not want to move out of KKIA Terminal 2? We think they should do this for the passengers, after all it is they who will have to pay the service charge,” she said.
‘We want this settled amicably’
She said that MAHB still hopes this issue will not escalate further and said: “We want to settle this amicably, for MAHB we find that on an operational level we are still cooperating well… we have many platforms which can be used to discuss the matter. There is no need to have this debate in the media.”
Given the nature of MAHB’s response to AirAsia’s LOD, the ball is now back in the latter’s court and it will have to decide if it wants to continue down the legal route or try to work it out outside the court.
When MAHB initially called AirAsia’s claims baseless, Aireen responded by saying that it would be for the courts to decide on the validity of their LOD and emphasised that AirAsia is serious about pursuing the matter.
“AirAsia has better things to do and it (issuing the LOD) shows how desperate we have become… if they do not respond then we will have to escalate it to a court case. We are very serious about this, we have tried our best to discuss this with them. But meetings after meetings with them have not resulted in decisions. We cannot work like this, this is not how a business should operate. Unfortunately, we have to do this,” she said.
Furthermore, with the two parties at loggerheads over AirAsia moving from Terminal 2 to Terminal 1 of KKIA, the battle between the airport operator and the airline seems far from over.
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