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AirAsia seeks new deal as budget terminal rejected

Posted on: February 24, 2009

By EILEEN NG,Associated Press Writer AP – Tuesday, February 24

KUALA LUMPUR, Malaysia – Malaysian budget carrier AirAsia wants a new terminal that is low-cost and efficient as the existing facility will soon run out of capacity with growing business and passenger traffic, an airline official said Tuesday.

The government on Sunday rejected AirAsia’s plan to build and operate a 1.6 billion ringgit ($438 million) low-cost carrier terminal in Labu in southern Negeri Sembilan state by 2011 in collaboration with conglomerate Sime Darby.

The projected fell through after Sime Darby declined to fund the infrastructure cost of 800 million ringgit ($219 million)

“There is no fixation in having (the airport at) Labu. The key thing for us is to have a hub and an airport that is functional and cost-efficient,” said a senior AirAsia official, who declined to be named citing sensitivity over the issue.

He said it was crucial for discussions to be accelerated on a new low-cost carrier terminal as the existing terminal _ located near the main Kuala Lumpur International Airport _ can accommodate only up to 15 million people annually and has insufficient aircraft parking bays.

AirAsia expects its passenger traffic to reach 30 million and its fleet to grow to 184 planes by 2013 from 72 currently.

“There is no room for growth in the current terminal. We need a new airport to be ready by mid 2011,” said the official.

“Despite the economic crisis, we are still expanding and have not deferred the delivery of new aircraft. It is important for us to have a hub,” he said. “All we ask for is a good cost-structure and greater efficiency.”

He said the government has told AirAsia to work with state-owned Malaysian Airports Holdings _ which operates the main international airport and the budget terminal _ for a “win-win” solution.

Malaysia Airports has earlier objected to the Labu terminal on concerns it may threaten growth of main airport.

AirAsia now accounts for 16 percent of international traffic and nearly half of domestic traffic. Some analysts have warned it may be detrimental to split Kuala Lumpur as a destination into two separate airports with Malaysia’s annual passenger traffic at only 25 million currently.

On Tuesday, AirAsia signed an agreement with Barclays Capital and BayernLB to finance 15 new A320-200 aircraft costing $700 million. Most of them will be delivered in 2009.

AirAsia still needs another $3.6 billion to fund 104 aircraft orders it has placed from 2010 to 2014.


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