MAHB seeks compensation for klia2 delay

KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) is seeking restitution by way of damages from contractors over the delay in constructing the klia2, which was slated to open on June 28.

In a statement to Bursa Malaysia yesterday, MAHB said its board had decided to impose liquidated ascertained damages (LAD) on the contractors, along with any other available recourse.

The airport operator, which has faced criticism over several delays in completing klia2 and inflating costs, also revealed the contractors had asked for time to revert with a revised date.

MAHB said the contractors had served notification that they were “unable to meet their contractual obligations for the opening date of June 28, 2013 for klia2”.

MAHB did not reveal which contractors had caused the delay.

The klia2 project entailed 37 packages as part of the stimulus package to boost the domestic economy back in 2009. The project was tendered out in 2009 with an expected completion date of September 2011.

Among the parties awarded contracts were Gadang Holdings Bhd, WCT Bhd, KUB Bhd, Bina Puri Bnd and UEM Group.

Both Gadang and WCT were involved in the earthworks, which were completed in the early stages.

However, the completion date for klia2 was revised several times due to amendments to the original plan — for instance building a bigger terminal that could handle over 40 million passengers and installing an automated baggage handling system.

The June 28 opening date was meant to coincide with the 15th anniversary of the Kuala Lumpur International Airport (KLIA).

MAHB has come under fire because of the long delay to the opening of the low-cost carrier terminal. Opposition parties have demanded an explanation from the airport operator with Pakatan Rakyat calling on the transport ministry to conduct an audit on the delays and inflating costs.   

PKR vice-president Nurul Izzah Anwar and DAP national publicity chief Tony Pua had earlier condemned MAHB for moving the location of klia2 from the north to the west which they said had made construction more difficult due to soft soil conditions.

However, a source familiar with the construction at klia2 pointed out that the land earmarked for the airport site mainly consisted of soft soil.

So far, MAHB has yet to reveal the cause of the latest delay.

The klia2 is expected to handle 45 million passengers per annum. The new low cost terminal will have 60 gates, eight remote stands, and 80 aerobridges. Its retail space encompasses 32,000 sq m which will accommodate a total of 225 retail outlets.

The new capacity is much more than the original plan approved in 2009; hence the project cost having ballooned from RM1.9 billion to RM4 billion, according to analysts.

Among low cost carriers, AirAsia Bhd is expected to be the main user of klia2. Currently, AirAsia passengers account for half of passenger volume at KLIA (including the current LLCT).

AirAsia is also building their headquarters at klia2.

JP Morgan Securities Sdn Bhd commented that the threat of potential cost overruns might weigh in on MAHB’s share price in the near term. Its preliminary estimates indicate that for every RM100 million in incremental cost, there will be a 1.4% impact on net earnings from amortisation, excluding potential rental income and retail income foregone.

However, going beyond the delays, the research house believes that klia2 stands to benefit from exposure to the region’s rising low cost travel demands, along with higher retail earnings.

MAHB share price has fared well so far despite the delay. The stock has gained RM1.07 or 20.5% year to date having hit a high of RM6.60 earlier this month. It closed at RM6.28 yesterday.

This article first appeared in The Edge Financial Daily, on May 30, 2013.

Looking for properties to buy or rent? With >150,000 exclusive listings, including undervalued properties, from vetted Pro Agents, you can now easily find the right property on Malaysia's leading property portal EdgeProp! You can also get free past transacted data and use our proprietary Edge Reference Price tool, to make an informed purchase.