By Jose Barrock
Malaysia Airports Holdings Bhd is the company which has been entrusted with the building of the second low-cost carrier terminal. But the project has been beset with delays and cost increases. KiniBiz looks at the real reasons behind this in several parts.
In the first part we look at managing director Bashir Ahmad Abdul Majid, who could be on his way out of the airport operator he has helmed for the past decade. He transformed the company to what it is today, but ruffled some feathers, which could result in him taking the fall for the delay in the KLIA2. Should the 63 year old aviation veteran take responsibility for the delay in the KLIA2 and resign?
On June 7 this year, it will be exactly 10 years since Bashir Ahmad Abdul Majid took over the reins at Malaysia Airports Holdings Bhd (MAHB).
However if there is a celebration to commemorate his decade with MAHB, it would unlikely be a very lively and a happy affair, with what has been happening lately. Bashir as the managing director of MAHB, seems likely to take the fall for the delay in the KLIA2.
Some say the targets for MAHB’s completion of KLIA2, were initially set for September 2011, but sources familiar with MAHB clarify this date as being set for AirAsia Bhd’s Labu terminal, and not KLIA2.
In January 2011, the first official date for KLIA2’s completion was set for October 2012, after which it was delayed to April 2013 and later end-June 2013, and is now only targeted for physical completion in October this year. This could cost Bashir his job.
Alliance Research in a note released on Monday evening after meeting the MAHB management said that the KLIA2 was likely to be completed in the first quarter of 2014, “due to time required for testing and preparatory works.”
Bashir’s exit
It is not clear what motivated Bashir to make a public announcement in end March that MAHB should look for a successor.
While he is said to have told friends that he’s been wanting to leave for sometime now, many are sceptical, and suggest he knew the knives were out for him.
“The writing was on the wall… the last time they renewed his contract in mid-May last year, it was for a one year period… it was clear that he is on his way out, maybe only you guys were caught off-guard,” a MAHB insider said when contacted by KiniBiz.
Then again, could it have been so clear that there were going to be delays in KLIA2 and that the October deadline would be missed— in May— five months before the October deadline, that when Bashir’s contract extension was up he was only given one year?
Bashir Ahmad
Those who are pro Bashir say that delays in airport construction, are nothing new.
“Berlin (Brandenburg Willy Brandt) airport was scheduled for completion in 2010, I think, but is still not ready, the baggage handling system delay at Denver airport is well documented…it’s common in the airline industry.
“It’s more important to get it right first time, instead of rushing it through,” an airport official said.
He added that even with the perceived delays, KLIA2 would still be among the fastest, if not the fastest, such airport ever built, and at a much cheaper price compared to other similar airport structures, in its class.
A check on-line indicates that Singapore’s Budget Terminal which has the capacity for 16 million passengers a year, is slated for completion in four years, in 2017, with construction starting this year, and costing some S$1.3 billion (RM3.2 billion) to build. KLIA2 meanwhile is slated for completion in three years, and is set to cater for 45 million passengers a year, at a cost of RM4 billion.
“We are also the first to have a third runway…both Singapore and Hong Kong don’t have a third runway as yet,” the airport official added.
Nevertheless heads will surely have to roll, with the delay supposedly causing much embarrassment.
AirAsia in the mix
Last week MAHB came out requesting liquidated ascertained damages or (LAD) from UEM, which does not happen very often as both are Government controlled entities.
If UEM pays the LAD, there could be some respite for Bashir, but there could be problems for UEM’s top brass.
“If UEM pays the damages, it’s an indication that they (UEM) are liable, much like an admission of guilt….if they don’t pay and contest, the LAD, it will be interesting, Bashir will likely lose his job,” an ex airline official said.
Judging by the looks of things, the situation is pretty tense, with the two Khazanah controlled entities at loggerheads, and both refusing to admit guilt.
According to MAHB the delays in the building of KLIA2 stems from sister company, UEM Group, which is a wholly owned unit of state controlled investment arm Khazanah Nasional Bhd— also MAHB’s 40.18% parent.
UEM meanwhile has said that it is not to blame as there were many changes in design of the airport, which drags budget airline AirAsia Bhd into the fray as well.
According to MAHB and UEM insiders, AirAsia it seems changed many aspects of the KLIA2, which resulted in the increased cost and delay.
A UEM insider commented, “Especially the changes in the baggage handling system, where they decided to fully automate it, from semi-automated, caused a lot of delay.”
AirAsia chief executive officer Tony Fernandes however is unlikely to take these accusations lying down.
Some also say Bashir was too accommodating to AirAsia, which resulted in his current predicament.
“It’s not like UEM is an inexperienced small construction company, without any capability,” an analyst from a local bank backed brokerage who covers construction said.
UEM’s track record is relatively solid having been involved in the building of the RM4.5 billion second Penang bridge, the satellite building for the KLIA1, the National Sports Complex in Bukit Jalil, and the 846-kilometre North-South Expressway, among others, which makes it odd that the company had difficulty with quite a straight-forward structure.
To recap, UEM and its joint venture partner Bina Puri Holdings Bhd won a RM997 million contract for the design, construction, commissioning and maintenance of the main terminal building of KLIA2, a satellite building, sky-bridge and piers.
Last week, MAHB announced that it was seeking liquidated ascertained damages for the delays at KLIA2, but stopped short of naming the culprit. Judging by UEM’s reactions, company officials are not going to accept responsibility for the delays.
“It’s quite simple actually, someone has to take the rap for it….if UEM takes the responsibility and pays damages, Bashir can keep his job and someone from UEM should get the axe, but if UEM contests this, like I think they will…Bashir may just be made the scapegoat even before a verdict is out,” an airline industry observer said.
Will Bashir take the blame?
To his credit, Bashir has been the driving force behind MAHB for the past decade.
When he took over in June 1993, the company’s share price was at RM1.57, in contrast to its close of RM6.03 on Monday giving it a market capitalisation of RM7.43 billion.
For its first three months of FY2013, MAHB posted RM126.06 million in net profits from revenue of RM1.03 billion in revenue. Earnings per share for the three months in review stood at 10.37 sen.
Those who know him say he gets more respect abroad than locally. Bashir is the President of Airports Council International, Asia Pacific Region, a position he has held since 12 May 2010. It seems he had turned down higher positions in world aviation bodies as a result of his intention to leave MAHB.
Under his watch, Bashir also managed to steer MAHB to the international arena, spreading its wings to India and Turkey among others.
But the pressing question now is will he resign from MAHB? Or will he just let his contract expire?
Tomorrow: What really happened at KLIA2
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