Proposed Labu aviation hub ‘fine’ for MRO, but not airport

KUALA LUMPUR (July 2): Almost 10 years after the federal government shot down a proposal to build an airport funded by the private sector in Labu, Negeri Sembilan, the topic has been revived after the Pakatan Harapan state government announced its intention to develop an aviation hub there.

When contacted, a Malaysia Airports Holdings Bhd (MAHB) spokesman told The Edge Financial Daily it will follow the transport ministry’s (MoT) directive on the matter.

“We stay guided by the MoT’s directive on the matter as any proposal should be submitted to the ministry for its consideration. At the moment, we do not have any information about the Labu aviation hub development for us to further comment on it,” the spokesman said via text messages.

The spokesman went on to say that MAHB’s Aeropolis masterplan that was endorsed by MoT in May 2016, already involves the development of both the airport city in Kuala Lumpur International Airport (KLIA) — KLIA Aeropolis — and the Subang Aerotech Park. The latter is targeted to be an aviation maintenance, repair and overhaul (MRO) hub.

Former MAHB managing director Datuk Badlisham Ghazali, whose tenure ended less than two weeks ago on June 22, said the proposed Labu aviation hub is "fine", provided it does not involve building any airports there.

“If it is just MRO facilities, it is fine. But if it involves an airport, there might be proximity issues as the two places (Labu and KLIA) are very close to each other. [So,] airspace management could be a challenge,” he said over the phone.

“The main hub for MRO activities that has been promoted is in Subang, because there is proximity [to] those companies doing MRO [and] they themselves have to collaborate with each other,” he said, adding that the airport operator has cleared 46 acres (18.61ha) of land in Subang for potential MRO-based investments at the Subang Aerotech Park.

“The government has to ask themselves which location should specialise in MRO. I can understand the state's intention to attract investment, but we have to look at it on the national level,” Badlisham added.

Transport infrastructure consultancy Modalis Infrastructure Partners associate director Khair Mirza concurred, saying Subang and KLIA's MRO industry growth could be affected if the Labu hub materialises.

“Whether you want to call it an airport, aviation hub or MRO facility, the key is whether it allows aircraft to take off and land because that will affect airspace management in that area,” he said.

On Sunday, Negeri Sembilan State Investment, Industrialisation, Entrepreneurship, Education and Human Capital Committee chairman Dr Mohamad Rafie Ab Malek was reported as saying that the state government intends to reach out to Airbus SE to open a finishing and assembly facility in Labu.

Mohamad Rafie said the state government had already obtained agreements from AirAsia Group Bhd and Sime Darby Property Bhd to collaborate in realising the project.

Airbus currently operates an MRO facility in Sepang via its wholly-owned Sepang Aircraft Engineering Sdn Bhd.

Transport Minister Anthony Loke and AirAsia group chief executive officer Tan Sri Tony Fernandes could not be reached for comment yesterday, while Sime Darby Property said it is waiting for more details from the state government.

While Mohamad Rafie’s proposal has not mentioned building a new airport, his words have prompted speculation on such a possibility.

Last Friday, AirAsia Group executive chairman Datuk Kamarudin Meranun said the airline would work with anyone who wants to build a low-cost carrier terminal, even though the airline has “sort of given up” on owning its own airport.

It is learnt that the federal government has an agreement with MAHB that it would have to compensate the airport operator if it allows privately owned airports to be built adjacent to KLIA.

The amount to be compensated is "substantial enough" to deter the federal government from doing so, according to an aviation analyst with a local investment bank. "And the Civil Aviation Authority (formerly the Department of Civil Aviation) would be required to upgrade its radar system due to airspace challenges and revise their protocol, that is another huge sum of investment," he added.

Furthermore, there may be political constraints if Labu were to have an airport.

The analyst noted that KLIA was mooted and built during Prime Minister Tun Dr Mahathir Mohamad's first tenure. As such, building another airport within close proximity to KLIA would be a threat to its role as a regional aviation hub.

“It is wiser to build the new airport further away from Sepang, independent of the Sepang airspace," he added.

This article first appeared in The Edge Financial Daily, on July 3, 2018.

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