KL to build terminal for low-cost airlines

KL to build terminal for low-cost airlines

Associated Press, Kuala Lumpur

Malaysia will build a terminal exclusively for low-cost airlines at the modern Kuala Lumpur International Airport, a minister said on Wednesday, in a blow to no-frills carrier AirAsia which had hoped to use an old airport closer to the city at a cheaper cost.

Transport Minister Chan Kong Choy told reporters that the 100 million ringgit (US$26 million) terminal will be ready by the first half of 2006.

The government decision to keep all airlines -- regular and low-cost -- at the current international airport is purportedly aimed at making it a regional hub to counter competition from neighbors Singapore and Thailand.

"This is a strategic measure to ensure that the Malaysian aviation industry continues to achieve rapid growth and the government's decision to develop as a regional hub is achieved," Chan said.

Singapore is adding a fourth terminal to its Changi airport and is building another terminal for low-cost airlines, while Thailand is building the new Suwarnabhumi airport outside Bangkok to replace the current one at Don Muang.

AirAsia, Asia-Pacific's leading low-cost carrier that revolutionized air travel in the region, had lobbied hard for a dedicated terminal at Subang airport, about 25 kilometers from old Kuala Lumpur.

Subang airport was Malaysia's main airport until it was relocated to the Kuala Lumpur International Airport in Sepang, about 70 kilometers from downtown Kuala Lumpur, in 1998.

AirAsia Group Chief Executive Tony Fernandes has said that his airline will be able to cut fares by up to 15 percent if it operates from Subang. He has said that airport costs can go down 30 percent in Subang because aircraft will save on fuel by spending less time waiting to land and takeoff than at the congested KLIA.

But AirAsia's rival, flag carrier Malaysia Airlines, believes a Subang hub could hurt the KLIA revenues, and that would not be in national interests.

Malaysia Airports Holdings, which runs KLIA, is expected to build the dedicated terminal for no frills carriers. KLIA handled more than 20 million passengers in 2004, up 15 percent from 2003's 17.4 million.