HERE BEGINS IT ALL 04 ANNUAL REPORT possibilities Infinite
ANNUAL REPORT ’04 MALAYSIA AIRPORTS HOLDINGS BERHAD (487092-W) (487092-W) YSIA AIRPORTS HOLDINGS BERHAD HOLDINGS YSIA AIRPORTS Head office Ehsan, Malaysia Darul Selangor 47200 Subang, Airport, Abdul Aziz Shah Sultan www.malaysiaairports.com.my MALA From friendly service From borderless technology From the preservation of our environment Many possibilities to tears of joy to business opportunities to shopping satisfaction for infinite demands MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
DISCOVER The Airport City
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COVER RATIONALE
Fulfilling dreams and achieving new possibilities for our customers once used to be a challenge but not anymore. We at Malaysia Airports are now able to offer the most comprehensive state-of-the-art facilities and services rivaled by none. Determination, commitment and imagination have given us the drive to forge ahead with optimism. Perseverance and hard work have propelled our progress beyond limitations.
In realising our past success and achievements, the one thing that mattered most was our ability to comprehend and respond to our customer’s unwavering demands. We pride ourselves on being able to provide solutions to all expectations and every moment in our airport city is truly an experience, which in many ways will continue to touch the lives of everyone, everywhere. 2-3 Inside
At A Glance ...... 3 Mission Statement ...... 3 Awards In 2004 ...... 4 From The Boards Chairman’s Statement ...... 6 Managing Director’s Review Of Operations . . . . .20 Calendar Of Significant Events ...... 42 Safety & Security: Our Paramount Concerns . . . .56 Occupational Safety And Health In Malaysia Airports ...... 58 Towards Organisational Excellence ...... 61 Green Globe 21: Blazing A Trail ...... 64 Our Contributions To The Nation ...... 68 Corporate Information Corporate Information ...... 70 Directors’ Profile ...... 72 Group Senior Management ...... 82 TH Annual General Meeting 6 Management Team Profile ...... 86 Group Corporate Structure ...... 90 ● The Pan Pacific Hotel, MAHB Group Organisation Structure ...... 92 Kuala Lumpur International Airport, Statement On Corporate Governance ...... 96 ● Thursday, 26 May 2005 Risk Management ...... 104 Board Audit Committee Report ...... 106 ● 11.00 am Terms Of Reference Board Audit Committee . . .108 Statement On Internal Control ...... 111 Financial Report Group 5-Year Summary ...... 116 5-Year Financial Highlights ...... 117 Group Segmental Analysis ...... 118 Airports Operated By The Group ...... 119 Financial Statements ...... 120 Malaysia Airports Statistics ...... 188 Shareholdings Statistics ...... 230 List Of Properties ...... 233 Group Corporate Directory ...... 236 Results Notice Of Annual General Meeting ...... 238 Statement Accompanying Notice Of Annual General Meeting ...... 240 Proxy Form MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
AT A GLANCE
KL International Airport (KLIA) • Asia Pacific’s Premier Air Transportation and Cargo Transhipment hub • The distance between the Main Terminal Building and the Satellite •A greenfield site covering 10,000 hectares. Building, comprising 1.2km, is linked by aerotrains. • Environmental conscious and themed “An Airport in the Forest and • 85 retail and 24 food and beverage outlets await visitors. Forest in the Airport”. •Available from within the terminal is the Airside Transit Hotel with •Total annual capacity of 25 million passengers per annum and 80 rooms and The Pan Pacific Hotel Kuala Lumpur International 1.2 million tonnes of cargo (1st phase). Airport with 441 rooms. •2 full service runways, 106 aircraft stands and 46 gates. • The Total Airport Management System (TAMS) links more than • 216 check-in counters and 26 custom counters. 42 systems, which interfaces and integrates communication network.
MISSIONSTATEMENT
To provide aviation gateway to Malaysia with a network of airports that will facilitate development of tourism, and the economy as a whole, through providing a cost effective aviation infrastructure and services at the highest international standards, meeting the needs of all customers. 4-5
Awards in 2004
•KLIA received the “Gold Award” for the Advertising Award by Air Transport World (ATW) 1 magazine. The award was based on the Integrated for Ease advertising campaign, which was created for the marketing of KLIA.
•KLIA was ranked 5th in the Airport of the Year 2004 survey organised by Skytrax Research, a British based air travel industry research company. BESTAirport 2
KLIA was 3rd for the Best Airport Worldwide in a survey by AETRA, a customer satisfaction benchmarking programme. The service element on “Overall Satisfaction with the Airport-All Passenger” consolidates all 27 service elements to decide on the best performing airport. Previously, the survey was known as IATA Global Airport Monitor. 1
KLIA received the Aerodrome Certification from the 3 Department of Civil Aviation (DCA). It is a new mandatory requirement by the International Civil KLIA was the first airport in the Asia Pacific Region and the first Travel and Tourism Aviation Organisation (ICAO) which requires all organisation in Malaysia to be Green Globe 21 certified, which requires the international airports open for public use to provide commitment to continual identification, control and improvement of the uniform safety conditions for all aircraft. 2 environmental and social impacts of the airport’s operations. 3 MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
BESTEmerging 4 FAVOURITE AsianAirport 8
5 6
7 9 BESTRetail BESTAirport Hotel
Malaysia Airports Training Centre, Penang, received the KLIA received the Creativity and Innovation Award 2004 organised by Malaysia Design & MS ISO 9001:2000 Quality Management System from Innovation Centre. SIRIM Berhad for provision of aviation security and fire rescue services training. 4 KLIA is third in the Favourite Asian Airport category for the TIME Readers’ Choice Awards survey. 6 ERAMAN Malaysia, a wholly-owned subsidiary of Malaysia Airports is the first airport retailer to achieve International KLIA is second in the Best Airport category of the Telegraph Travel Award 2004, the most Superbrands Status by Superbrands International. significant study of the travel tastes and habits of British consumers, based on the annual poll of selected readers of The Daily Telegraph and The Sunday Telegraph. 7 ERAMAN received MS ISO 9001:2000 Quality Management System from SIRIM Berhad under the provision of front line Malaysia Airports 2003 Annual Report received the Certificate of Merit in the National services for airport retail operation. 5 Annual Corporate Report Awards 2004 (NACRA). 8
In the 5th ASEAN Energy Award, KLIA was first runner-up The Pan Pacific Hotel Kuala Lumpur International Airport been awarded “Best Airport for the ASEAN Energy Efficiency and Conservation Hotel in Asia 2004” by Business Asia Magazine and Bloomberg TV. 9 (EE&C) Best Practices Competition for Energy Efficient Buildings (New and Existing Buildings).
MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT CHAIRMAN’S STATEMENT
DEAR SHAREHOLDERS,
It is my pleasure to present this Annual Report and audited Financial
Statements of Malaysia Airports Holdings Berhad at the Group and
Company level for the financial year ended 31 December 2004.
Tan Sri Datuk Dr. Aris Othman Chairman 8-9 Chairman’s Statement (cont’d.)
‘ INFINITE POSSIBILITIES’
We look back on the year under review with The challenge for MAHB in the coming years is to satisfaction and a sense of achievement. In many transform these possibilities into realities. But as our respects, the year 2004 was a significant watershed in achievements of the past year amply demonstrate, the development of MAHB. Record operating and given the will, commitment and hard work, we can financial results were posted, bearing testimony to the rise to the challenge and succeed. MAHB stands resilience of the industry and the immense efforts we poised for a new phase of growth. It will definitely be have invested in responding to the challenges of an exciting journey, and barring any unforeseen 2003. Passenger movements at airports operated by events, it may also well be a rewarding one. I invite the MAHB Group grew by 17.7% in 2004, to 39.4 million you to join us on this journey as we strive to bring passengers. Cargo traffic also rose during the year, MAHB to new heights of achievement. while MAHB’s retail operations achieved its best performance ever. All these factors contributed towards a 14.6% growth in Group revenue, surpassing Financial Performance MAHB’s financial the RM1.0 billion mark for the first time. performance for the financial year ended 31 December 2004 set a new record when Group From this new position of strength, and with the consolidated revenue breached the RM1.0 billion industry returned to health, the MAHB Group is moving level for the first time. For the year, MAHB posted a forward with confidence to chart its own destiny. The consolidated revenue of RM1,024.7 million, an momentum has been established, and as barriers increase of 14.6% from RM894.0 million recorded continue to fall and the global village becomes a in the previous corresponding period. The Group reality, the possibilities open to us to forge ahead in achieved a consolidated profit before tax of RM195.6 the new liberalised marketplace are infinite. MAHB million, which represents a 29.0% growth from RM151.6 has the prerequisites by way of its experience and million achieved previously. expertise in the business. Following the restructuring exercise undertaken last year, the platforms are in place to tap opportunities coming our way. By knowing our strengths and inherent advantages, we are mapping out cogent strategies to consolidate the gains we have made the past year. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
MAHB’s commendable performance on the financial front was attributed to an improvement in aviation traffic during 2004, as well as an increase in other business activities of the Group, notably the retail business segment. However, aeronautical activities remained by far the largest contributor, accounting for 65% of MAHB’s airport services revenue.
In line with traffic growth, the Group’s retail subsidiary also had a bumper year. Malaysia Airports (Niaga) Sdn. Bhd., operating under the brand name of Eraman, posted retail revenue of RM207.5 million, an increase of 28.0% from RM162.1 million recorded in 2003. Eraman derives revenue from its chain of duty-free and non-duty free shops as well as food and beverage outlets at international airports operated by MAHB. 10-11 Chairman’s Statement (cont’d.)
Corporate Developments On 14 October 2004, Minister of Finance (Incorporated) transferred its 49.26% equity interest in MAHB to Khazanah Nasional Berhad (Khazanah), thereby increasing Khazanah’s equity stake in MAHB to 72.74%.
MAHB is currently engaged in negotiations with the Government on a proposed corporate and financial restructuring of the Group to address several financial issues affecting the Group. These issues include the financial obligations of the Group to the Government pursuant to the Concession Agreement in relation to the KLIA.
In the meantime, the Government has agreed that lease rental charges to the Group under the KLIA Concession Agreement will be temporarily suspended until a new scheme to be formulated under ongoing negotiations between MAHB and the Government, is formalised.
In line with the move by the Government to promote a culture of high performance in Government Linked Corporations (GLCs), MAHB has implemented a Key Performance Indicators (KPI) programme with four broad objectives:
• Ensure focus on key business priorities • Attract and retain outstanding professional talent • Enable performance to be measured objectively • Motivate employees by linking rewards to performance
The KPI exercise has been rigorously implemented among the upper echelons of management with the development of individual scorecards involving a total of 17 stakeholders, from the position of General Managers upwards. We are already seeing the benefits of the KPIs in measuring strategic initiatives and key levers for the success of the Group. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
Operational Highlights One of the highlights of Unquestionably, the year’s highlights would include two 2004 was undoubtedly the impressive rebounding of important certifications achieved during the year. In the aviation industry. With an estimated 3.7 billion doing so, the KLIA has earned a first in the Asia-Pacific movements during the year, traffic recovery was region. The first is the Aerodrome Certification in line phenomenal across all regions, and Malaysia was no with the ICAO Annex 14 requirements. We are proud to exception. Total passenger traffic in MAHB’s system of say this was achieved within the time frame stipulated airports increased 17.7% to 39.4 million pax, with 21.1 by ICAO and is testimony to our commitment to million passengers passing through the KLIA alone. A provide a safe aerodrome for aircraft operations. The total of 46 international airlines operated at KLIA in other is the Green Globe 21 certification, the global 2004, an increase from 43 recorded the previous year. benchmarking, certification and improvement system This will be covered in greater detail in the Managing for sustainable travel and tourism. Director’s Review of Operations. We continued to make incremental gains in key areas of quality, safety and airport security. A total of Strong traffic growth was only a part of the successes seven operating units and divisions within KLIA have chalked up in 2004. The KLIA continued to be the been accredited to ISO 9001:2000, the internationally recipient of several international awards and recognised quality system. The four other international accolades, bearing testimony to a great deal of effort airports were similarly accredited in 2004. Our plan is and hardwork coming to fruition. Significantly, we to have all the domestic airports ISO-certified, and the have been steadily moving up the global ranking for documentation phase has already been completed customer satisfaction, based on surveys conducted by for 10 airports. MAHB also commissioned UK-based the Global Airport Monitor now known as AETRA. In consultant group to review the security system at KLIA. 1999, the KLIA achieved 6th position for overall Notwithstanding the favourable report from the satisfaction, but we have since gone up two notches consultant, we decided to strengthen the security higher in the AETRA 2004 survey. In our non- system at KLIA with the appointment of an additional aeronautical operations, Eraman was short-listed by 256 auxiliary police men and women. KLIA recently Raven Fox as one of the top three ‘Best Travel Retailer achieved 5th place in IATA’s list of the world’s most Operating in a Single Country’ in the Asia-Pacific secure airports. Safety remained our paramount region. For the fourth time, the Pan Pacific Hotel Kuala concern, and one of the improvement measures Lumpur International Airport was named the Best taken during 2004 was our investment in a RM2.0 Airport Hotel in Asia 2004 by Business Asia and million aircraft simulator. Bloomberg Television. 12-13 Chairman’s Statement (cont’d.)
As custodian of the nation’s network of 39 airports and Short Take- Off and Landing ports (STOLports) strategically spread throughout the country, MAHB plays an important role in serving the nation’s interest. Our network is unmatched both in terms of quality and distribution anywhere else in the region. Domestically no segment of the population has been left out from benefiting from our airport network. Over the years, we continued to improve on the network, thereby narrowing the urban-rural divide. The year under review saw the official launch of a new terminal building at Sultan Ismail Petra Airport, Kelantan; a STOLport at Padang Terbang Redang; and the opening of the new Limbang Airport in Sarawak for operations. Other major redevelopment and improvement works are ongoing at the Penang International Airport, Kuching International Airport, Alor Star Airport, Terengganu Airport in Kuala Terengganu and also the Sibu Airport in Sarawak.
In the face of human tragedy, it is gratifying that MAHB was able to lay a meaningful role in helping alleviate the sufferings of those coastal communities badly affected by the Asian tsunami disaster. As the world responded with an outpouring of generosity, four of our airports were used as transit points for tsunami relief operations. The Sultan Abdul Aziz Shah Airport at Subang was used by the United Nations World Food Programme as a forward staging area for relief supplies en route to Aceh, Sumatra. On our part, we waived landing and parking charges for these humanitarian flights. Up to 3 February 2005, a total of 270 relief flights have landed at the four airports. Even as we go into print, relief efforts are still ongoing at the KLIA and the Subang Airport.
Our own people have responded whole-heartedly to the plight of the tsunami victims. In the spirit of caring and sharing, a sum of RM30,000 was collected from staff for the Tsunami Relief Fund through MAHB’s various in-house clubs and associations. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
Transforming Possibilities The solid gains and results achieved in 2004 provide a strong base for moving forward. In an industry that has still significant potential for growth, at home and abroad, we are faced with an enviable list of possibilities that we can transform into realities.
The Government has been consistent in its avowed goal to transform KLIA into a regional aviation hub. This may not seem an impossible dream considering the leaps and bounds KLIA has made in just six years of its existence. The 21.1 million passengers achieved in 2004 can be considered a critical mass for accelerated growth. Air travel in Asia Pacific is expected to grow by 8.3% per annum until 2008, and this is expected to benefit all big airports in the region. Within Malaysia, sustained economic growth and higher per capita income will continue to serve as catalysts for growth of air transport. We also have a reasonably large population with a propensity for increased air travel. This has been spurred on by the emergence and rapid expansion of AirAsia. In assessing its potential as a regional hub, KLIA has many factors in its favour even when compared with the more established airports. Location-wise, KLIA is as close to the centre of Southeast Asia as one can get. From here, it is only a short flight to any capital city in the region, and this makes KLIA an ideal stepping stone to the rest of the region. We also see the KLIA as a gateway to China and India, the two new economic powerhouses of the 21st Century. Both countries are opening their doors for business and tourism, unleashing a vast potential of untapped opportunities that we can exploit.
To stay abreast of the competition, the prerequisites are capacity, connectivity, marketing and efficiency. In order to compete successfully with long established airports in the region, Malaysia needed an airport that will provide capacity ahead of demand. Thus, in selecting the site for a new airport, Sepang was chosen with considerable foresight because of its huge land bank reserves. The master planners have planned for the development of the KLIA in phases, and what we see now is only Phase 1 development. The plan for future development and ultimate expansion includes five runways and a passenger handling capacity of 100 million pax per annum beyond the year 2020.
For the immediate future, three major upgrading and expansion programmes are in the pipeline. Upgrading works in readiness for Airbus 380 (A 380) operations are progressing as scheduled, for planned completion by the end of 2006. The 555-seat double-decker A 380 is the world’s largest passenger plane. Malaysia Airlines will commence A 380 operations from 2007. A new terminal dedicated to LCCs with handling capacity of RM10 million passengers per annum is targeted for completion by the early of 2006. Because of the lead time required in building major infrastructures, we are already planning for the construction of a new Satellite B terminal under the Phase 2 development of KLIA. When implemented, these projects will increase the handling capacity of the KLIA by an additional 10 million passengers per annum to 45 million passenger per annum. 14-15 Chairman’s Statement (cont’d.)
In terms of connectivity, we are pleased that our cater to the most sophisticated or intrepid of marketing efforts to attract more airlines to operate at travellers. MAHB is already working closely with the KLIA have borne some results. Currently we have the relevant agencies to sell Malaysia to the world. lowest total cost of operations per air transport movement in the region according to a study done in In so far as efficiency is concerned, the many awards 2004. This will be maintained to enhance our we have secured speak volumes. KLIA has come competitiveness. Airlines also appreciate our closer and at times even overtaken the leaders in the operational flexibility, good safety record and region in service delivery. We have been investing premium quality of services provided and despite efforts to improve our position, and this has been competition, we continue to increase the number of reflected in various benchmarking surveys such as the airlines operating into KLIA. With a greater airline mix, one conducted by AETRA. it means that the connectivity level at the KLIA will improve further. The connectivity factor is important Nonetheless, we are not about to rest on our laurels. for the further growth of the KLIA, especially to The near future will see MAHB embarking on an destinations such as the United States (US). Currently, Airport Customer Satisfaction and Performance US carriers pick Malaysian passengers from Hong Programme that will allow us to benchmark ourselves Kong, Tokyo and Singapore even though there is against the best in the industry. Through customer enough traffic for them to operate direct services. feedback, we will be able to improve our services and facilities provided. We will not settle for anything In a competitive business such as ours, we recognise less than to be the best airport in the world. that more needs to be done in the marketing effort. Bilaterals will need to be expanded in tandem with The rise of LCC as a key player in the airline industry multilateral initiatives. Incentives will be given as has considerably boosted Malaysia’s competitive appropriate to draw new airlines and risk sharing is position. From a two aircraft company, AirAsia is now already being practices as appropriate. Ultimately, the leading LCC in the region. Domestically, AirAsia airports only serve as gateways. The attraction for has been a boom to domestic air travellers. Since airline passengers, be it tourists or business travellers, is commencing international operations, its international the country itself. Malaysia is not short on attractions. numbers have been equally impressive, with new Malaysia’s political stability, enviable record of destinations added at break-neck speed. Over the sustained economic growth and high living standards last three years, AirAsia had about nine million make the country a haven for business. As a tourist passengers using its services, and the figure is destination, we have many selling points that can projected to grow. Increasing LCC operations are also MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
likely to benefit Malaysia at the expense of other more established hubs in the region due to origin-destination traffic, which is generally the modus operandi of LCCs. Although other regional hubs have set up their own LCC, its impact is expected to be minimal as AirAsia has a better strategic advantage.
Another possibility that we have been aggressively pursuing is the growing internationalisation of our operations. KLIA serves as a product that can be sold internationally. Its stature and the many awards it has received have brought international recognition for the country, drawing attention to MAHB’s capabilities in managing and operating a world-class facility. Since the construction of KLIA, MAHB has received several requests to become partners in developing other airports. Progress was made in our efforts to gain a foothold in the Indian continent when we signed a Memorandum of Understanding on 20 December 2004 with Hyderabad International Airport Ltd to build, operate and manage the new Hyderabad International Airport in the Indian State of Andhra Pradesh. The Middle East is another area with great potential and we are exploring investment opportunities in Libya, Oman and Turkey. We are presently in the process of identifying a suitable partner to establish a joint venture to undertake the airport planning and management aspects.
As MAHB begins to chart a new phase of development, the possibilities are infinite. But as masters of our own destiny, we have honed down these possibilities to a finite number where we have a distinct competitive advantage and the greatest chances of success. MAHB takes a holistic approach in the development and management of its business, but always with two objectives foremost in mind: to serve the national interest and to strive towards improving shareholder value over the long haul. 16-17 Chairman’s Statement (cont’d.)
Outlook & Prospects The coming financial year is shaping up to be a promising one. Global economic growth is projected at a steady pace of 4% in 2005. Closer to home, ASEAN economies are expected to grow by between 5 and 5.9% in the coming year. The prospects for the Malaysian economy remains sound, with GDP expansion projected at 5 to 6%. The private sector will continue to be the main drivers of growth in the Malaysian economy, with the Government committed to strengthening the fiscal position.
While it is not expected to reprise the phenomenal figures achieved in 2004, global air traffic will continue to maintain its growth momentum in 2005. The Airports Council International (ACI) has forecast that global passenger traffic will grow by 6% the coming year, driven mainly by a 5.1% growth in global tourism. In tandem with the expansion of world trade projected at 5.8% in 2005, global cargo air traffic is forecast to grow by 5.1%.
MAHB has mapped out various strategies in moving forward. However, we acknowledge that much will also depend on the outcome of ongoing negotiations with the Government to resolve several financial issues that have plagued the Group for the past couple of years. In the meantime, it is business as usual. We have our work cut out for us in the coming year with a number of priority development projects to be implemented during 2005.
On the non-aeronautical side of our operations, we will be pressing ahead with the revamp of the retail business area at KLIA. MAHB’s commercial operations have huge untapped potential to increase the Group’s future revenue stream. Presently, only 35% of MAHB’s airport services revenue comes from its commercial activities, which is low compared with some other airports that derive 60% of its revenue from non-aeronautical sources. The coming year will see MAHB channelling efforts to unlock the largely untapped potential of its commercial operations. As part of the development plan for KLIA’s retail activities, passengers can expect bigger outlets and a wider and better brand selection. Improvements will also be introduced to the main terminal building and contact pier in stages. Once completed, KLIA will raise the bar for a new airport retail and dining experience.
Within the confines of this report, I can only enumerate some of the improvement programmes that we will be implementing. All our efforts are geared towards achieving a new level of customer satisfaction and enhancing the Airport Experience not only at KLIA but the entire MAHB system of airports. In short, you can expect more from MAHB in the coming year. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
Acknowledgements A great deal has been Three new members were appointed to the Board accomplished in 2004, and I thank both management during the year. Puan Eshah binti Meor Suleiman was and staff for their dedication, professionalism and appointed as a Non-Independent Non-Executive hard work. However, the real test of our mettle and Director on 29 January 2004. On 1 March 2004, Encik determination to chart our own destiny will begin from Gho Peng Seng was appointed to the Board as an 2005. Having proven our capabilities in taking Alternate Director to Puan Eshah, while Encik Long momentous events in our stride, I remain confident See Wool was appointed as an Alternate Director to that our people will continue to rise to the occasion. Dato’ Zaharaah binti Shaari. On behalf of the Board, I welcome all the new members and look forward to As always, we remain grateful to our support group, benefitting from their fresh insights and experience. comprising various Government agencies, notably the Ministry of Transport, Ministry of Finance, Tourism Malaysia as well as the Immigration, Customs and Quarantine as well as Police and Fire Departments. In a long and productive working relationship with these agencies, we have developed rapport and understanding. We also enjoy a good relationship with our bankers and airlines from all over the world. The millions of customers we are proud to serve and naturally, our shareholders, deserve special mention. TAN SRI DATUK DR ARIS OTHMAN The Board and I thank all of you for your support. Chairman KLIA – THE AIRPORT CITY A CITY IS THE PLACE TO SEAL DEALS. You can actually run your business at our airport. IN OURS, THEY TEND TO TAKE FLIGHT if you didn’t already know, that is. We have every facility to make sure your business soars. 20-21
MANAGING DIRECTOR’S REVIEW OF OPERATIONS
2004 was a banner year for Malaysia Airports Holdings Berhad (MAHB). It was a year marked by good operational performance, which was mirrored by the growth in passenger, aircraft and cargo movements at the airports operated by the Group.
The commendable results of the past year will serve as a solid foundation on which the Group can build upon for future growth and profitability. I am confident about the prospects for the industry we are in. With a view to the future, we have put in place the appropriate structure, people and strategies, positioned not only to cope with the changing operating environment but also to seize opportunities coming its way.
DATO’ SERI BASHIR AHMAD ABDUL MAJID Managing Director
22-23 MANAGING DIRECTOR’S REVIEW OF OPERATIONS (cont’d.) MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
OPERATING ENVIRONMENT
In marked contrast to the previous year, 2004 was a very good year for the aviation industry. Although the outbreak of avian flu caused minor ripples, its repercussions were not of the severity or scale of the Severe Acute Respiratory Syndrome (SARS).
Consequently, the global economy was able to record its strongest growth of 4.8% since 1984. Economic expansion was led by the United States, reinforced by strong growth in Asian economies and revival of growth in Japan and Europe. The Malaysian economy has benefited from the more robust growth in world trade and domestic demand, with real gross domestic product (GDP) increasing by 7.1% in 2004, the highest registered since 2000. (Source: Bank Negara Malaysia Annual Report 2004)
Against a more favourable economic backdrop, the global aviation industry rebounded strongly in 2004. According to the Airports Council International (ACI), international scheduled passenger traffic increased 10.9% and cargo traffic by 8.9% over 2003 levels. All regions reported double-digit year-on-year growth with the Middle East and Asia Pacific regions leading the way, recording 14.8% and 17.9% growth respectively for passenger traffic. Cargo traffic also saw double-digit growth in all regions, with Asia Pacific registering a growth of 14.2%. 24-25 MANAGING DIRECTOR’S REVIEW OF OPERATIONS (cont’d.)
OPERATIONAL HIGHLIGHTS AERONAUTICALOPERATIONS
One of the highlights of 2004 was passengers, representing a growth of mainly to increased frequencies, and undoubtedly the impressive rebounding 20.6% from 2003. Passenger traffic introduction of new services and of the aviation industry. With an handled in December 2004 was the destinations. The low cost carrier (LCC), estimated 3.7 billion passenger highest recorded monthly movements AirAsia Berhad (AirAsia) and Malaysia movements during the year, traffic in MAHB’s airport history. In that month, Airlines continued to bring in new recovery was phenomenal across all KLIA alone handled 2.2 million passengers, accelerating the growth regions, and Malaysia was no exception. passengers, 311,154 passenger above momentum at all airports. the highest recorded in December In 2004, total passenger movements 2003. Of this figure, 1.3 million were Despite regional competition, airports rose 17.7% to 39.4 million passenger, international passengers, breaking the operated by the Group continued to compared to 33.5 million in 2003. previous record set in August 2004. attract new airlines. As at December Airports reported an 11.9% growth in 2004, a total of 46 airlines were commercial aircraft movements. An interesting development in 2004 is operating at KLIA, an increase from Cargo traffic also staged a recovery, the growth registered for Kota Kinabalu 43 recorded in the previous increasing by 10.2% to 957.1 million kg. and Kuching international airports. Both corresponding period. The new airlines All five international airports in Malaysia airports have now overtaken the included Lufthansa German Airline, recorded a double-digit growth in Penang airport in terms of total Jatayu Airlines, Riau Airlines, Star Air, passenger movements. Exceeding passenger movements. With only a few Hainan Air (chartered flights) and earlier expectations, KLIA alone exceptions, MAHB’s domestic airports United Parcel Services (cargo). handled a total of 21.1 million recorded positive growth numbers, due Additionally, a total of 22 or 39% of MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT 26-27 MANAGING DIRECTOR’S REVIEW OF OPERATIONS (cont’d.)
international airlines operating in Malaysia increased their Through such forums and personal visits to the airlines’ frequencies during 2004. Our efforts to stimulate origin- corporate headquarters, we have been aggressively destination (o&d) travel continued to pay off. The year also promoting KLIA to foreign carriers and establishing Malaysia saw AirAsia aggressively expand its international Airports as a brand name synonymous with the quality of its destinations, while another local carrier Berjaya Air, has services and facilities provided. Under our marketing increased its flight frequencies to Indonesia. incentive programmes, we continued to offer rebates on landing and parking charges for existing and new airlines These statistics underscore the tremendous marketing and operating to KLIA, Penang, Kota Kinabalu, Kuching and promotional efforts we have initiated to attract international Langkawi. The offer was also extended to airlines operating airline to commence or increase operations into Malaysia. new frequencies and routes to KLIA. In this regard, the airline and tourism industries and our own business of managing and operating airports are Among the many awards and accolades MAHB received inextricably linked. Working closely with the tourism during the year, perhaps one of the most satisfying is the Malaysia, we played our part in helping showcase Malaysia one accorded by the AETRA Airport Customer Satisfaction and the many attractions our beautiful country has offer Programme. Jointly conducted by Airports Council through a series of events organised at KLIA and at International (ACI) and International Air Transport international aviation events. Association (IATA), the AETRA survey covers the entire airport experience of international and domestic travellers on We also continued to increase our marketing efforts. 27 service-related parameters. The KLIA was ranked third for Through our participation in airline networking forums such the Best Airport Worldwide 2003, arguably one of the most as the 10th World Route Development Forum in Madrid, comprehensive and respected benchmarks for customer where MAHB had one of the most outstanding booths. satisfaction. In the most recent 2004 AETRA survey, KLIA During the year, Malaysia hosted the inaugural Human achieved second placing in the 15-25 million pax/year Resource Development Working Group Meeting for the category and fourth placing for overall satisfaction. ASEAN International Airports Association. In April 2004, MAHB Considering that last year was only KLIA’s sixth year of was one of four agencies that played host to the second operation, it is gratifying that our ranking in major edition of New Route Asia, a forum that brought together benchmarking surveys has been improving steadily. This was more than 150 airport and airline delegates to deliberate reaffirmed by other awards garnered in 2004: second in the on future market opportunities to Malaysia Best Airport category by the UK-based Telegraph Travel Awards 2004; third in the Favourite Asian Airport category by the TIME Readers’ Choice Awards survey and fifth in the Airport of the Year 2004 by Skytrax Research, a British air travel research company. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
Our non-aeronautical operations have fared equally well, with Malaysia Airports (Niaga) Sdn. Bhd. which operated under the brand names Eraman short-listed by Raven Fox as the top three ‘Best Travel Retailer Operating in a Single Country’ in the Asia-Pacific region. In recognition of its standing as Malaysia’s biggest airport retailer, Eraman has been accorded Superbrand Company status by Superbrands Malaysia.
On the strength of the quality of its facilities and services, Pan Pacific KLIA was again named Best Airport Hotel in Asia 2004 by Business Asia and Bloomberg Television. This was the fourth time that Pan Pacific has won the award over the past five years.
KLIA achieved two important industry certifications during the year. On 13 May 2004, KLIA received the Aerodrome Certification from the Department of Civil Aviation, the first airport in the Asia Pacific region to be certified. This is a new mandatory requirement of the International Civil Aviation Organisation (ICAO) stemming from increasing global concerns on aviation safety due to the rapid growth of the air transportation industry. There is therefore a need to ensure that all international airports provide uniform safety conditions for all aircraft. The certificate acknowledges that KLIA has met the stringent requirements on Aerodrome Certification based on Annex 14 Convention on International Civil Aviation. Efforts are currently underway to attain certification for the other international airports under our wing. However, by the year 2006 our plan is to have all our domestic airports certified as well.
Another feather added to our cap was the coveted Green Globe 21 (GG 21) certification for KLIA, which is a formal endorsement of its status as the first environmentally friendly airport in the Asia Pacific region. GG 21 is the global benchmarking, certification and improvement system for sustainable travel and tourism. It is based on Agenda 21, a comprehensive programme of sustainable development actions endorsed by 182 Heads of State at the United Nations Earth Summit in 1992. The certification achieved by the KLIA is the highest level of Green Globe qualification and is renewed annually. Achieving this certification requires the implementation of an integrated Environmental Management System. In our efforts to promote sustainability, we have adopted the ‘3Rs’ – reduce, reuse and recycle – as an integral part of our operations. For our conservation efforts, the Main Terminal Building (MTB) of KLIA was also placed the first runner-up for the 5th ASEAN Energy Award 2004.
In the continual effort to improve all aspects of airport operations, one of the most important tools at our disposal is registration to the internationally recognised ISO system of quality management. As we have stated in our Annual Report last year, MAHB is aiming for group-wide ISO certification and the year in review saw us moving closer towards this target. Within KLIA, a total of 7 key operating units and divisions have already been certified to ISO 9001:2000, while other units and divisions are at varying stages of obtaining registration. The other four international airports have been similarly accredited during 2004. Documentation for 10 domestic airports has been completed and we are on track for targeted certification in 2005. The remaining domestic airports will be ISO-certified in 2006. 28-29 MANAGING DIRECTOR’S REVIEW OF OPERATIONS (cont’d.)
Major strides were also taken to improve security and safety MAHB continued to make headway in its overseas in the MAHB system of airports. During the year MAHB expansion plans. New ground was broken in our efforts to commissioned a consultant group from the UK to undertake gain a foothold in India. On 20 December 2004, witnessed a critical review of the security of the KLIA. The audit report by YAB Dato’ Seri Abdullah Hj Ahmad Badawi, Prime submitted by the consultant concluded that ‘security at Minister of Malaysia, MAHB signed two agreements for the KLIA is of a good standard and is in full compliance with development of the Hyderabad International Airport in the International Civil Aviation Organisation (ICAO) India. MAHB’s involvement in the venture as by way of an standards and recommended practices’. Notwithstanding 11% equity interest in Hyderabad International Airport the high marks we received, MAHB has beefed up the Limited (HIAL). The Group will also assist HIAL in the security system at KLIA with an additional 256 newly operations and maintenance of the proposed new airport. appointed auxiliary policemen and women. It may be pointed out that MAHB is the first airport operator in Southeast Asia to be awarded a concession for the One of the investments in airport fire and rescue service in development of airports in India. The Group has also 2004 was our RM2.0 million aircraft simulator to enhance fire expressed its interest to participate in the development of rescue operations at the KLIA. Modelled after a Boeing 737 the New Delhi International Airport and the Mumbai Airport aircraft, the simulator enables our Airport Fire and Rescue projects in joint venture with Indian-based companies. Services to have the hands-on experience in dealing with a scenario of an aircraft crash. Meanwhile, opportunities continue to unfold in the global village. Currently, we are looking at investment opportunities in the Middle East, our specific areas of interest being the planning and management of airports. We are in the process of identifying suitable local partners to form a joint venture to participate in these projects. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
COMMERCIALACTIVITIES The Commercial Division is responsible for the following main objectives:
• To increase non-aeronautical revenue • To transform KLIA into a preferred shopping destination in the Asian region • To increase average dollar spending per passenger • To enhance existing facilities and services at the Airports
The Commercial Division is primarily responsible for the Empirical studies point to the correlation between management of all non-aeronautical activities at the ‘passenger awareness’ and ‘shop visitation’ and ‘actual Airports operated by the Group. It derives revenue purchase’ by the passenger. In order to increase average generated from the rental of commercial space for retail, spending per passenger, passengers must first be aware of food and beverage (F&B) outlets, lounges, offices, service the range of products, services and facilities available at the counters, storage areas and for advertising and KLIA. To maximise awareness, the new retail development promotional activities, among others. plan will feature open malls, emporiums and island outlets, supported by retail signages and information leaflets. One of the main tasks and challenges facing the Commercial Division is to increase the contribution from the More effort will be devoted towards improving customers’ commercial activities. Several strategies have been drawn perceptions of KLIA’s product and service offerings. This will up and will be implemented in the coming financial year. involve a paradigm shift in the mindsets and attitudes of customers to one that recognises value for money. To The Commercial division plans to improve the retailing reinforce this new perception, KLIA will set a ‘lowest price standards and presentation at KLIA. Bigger shops, better guarantee’ on selected items. In this way, we hope to brands and more varied selections will be introduced. The establish the groundwork for building long-term loyalty development will be implemented in stages. When among customers. completed, KLIA is set to raise the standards for totally new airport retail and dining experience. 30-31 MANAGING DIRECTOR’S REVIEW OF OPERATIONS (cont’d.)
A NEW LEVEL OF CUSTOMER SATISFACTION
As mentioned earlier, the KLIA has fared well in the global our strengths and weaknesses, and thereafter work to ranking scale. Not only are we consistently placed at the improve on them to remain in the top league. We have top end, over the years we have progressively improved on always relied on customer feedback to improve our facilities our ranking. However, I personally feel that we have the and services. Suggestion boxes are strategically placed potential to do better. throughout the airport for customers to air their views. Their suggestions and any complaints are taken very seriously and One of the key performance indicators of our success as acted upon promptly. To cite a few examples, we have an airport will revolve around the customer experience. taken measures to reduce lengthy queues and expedite Consistency in high-quality customer experience will build check-in procedures, without compromising on either safety the KLIA’s and MAHB’s brand and reputation. This in turn will or security. We have also addressed the problem of touts ensure that more airlines and therefore more passengers will soliciting business at the airport exit, by stationing security travel to Malaysia. How successful we are in delivering the personnel at strategic locations. Wherever possible, we take best possible customer experience will be the acid test in a proactive stance in introducing improvements. In the coming year. September 2004, for instance, MAHB became the first airport in Asia to launch an e-timetable at the KLIA. The e-timetable Today’s customers are more discerning and demanding. allows travellers to access the schedules of all direct and Many have travelled the world, they have seen the best connecting flights to, from and via the KLIA. there is on offer, their spending power is greater and it follows that their expectations are also higher. The demands The coming year will see MAHB embark on an aggressive of this new breed of global travellers are varied. If we use programme to bring the KLIA to a new level of customer the AETRA Customer Satisfaction Measurement and satisfaction. Called the Airport Customer Satisfaction and Benchmarking programme as an indicator, there are at Performance Programme, this is essentially a benchmarking least 27 service elements to be considered. These range tool to assess the customer experience at our airports on a from connectivity, ease of passage through the airport, wide range of service elements. The results will provide service facilities and delivery, cleanliness, ambience, empirical data on the perceptions of international, domestic security in place, safety to value-for-money shopping. and transit travellers, which will serve as an index to measure the service quality at our airports. The data will be compiled Our certification to the ISO standards, GG 21 and Aerodrome through various methods, including questionnaires, check- Certification undoubtedly addresses some of these areas sheets, site observation, interviews and surveys. By pinpointing and are indicative of the KLIA’s status as a world-class our areas of weaknesses, we can be more precise in adopting facility. We need a more focused approach to determine corrective action and the appropriate improvements. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
CORPORATE CITIZENSHIP
Corporate social responsibility has always been an integral part of the way we conduct our businesses. At MAHB, our efforts to play a meaningful role in society have evolved over the years. Each year, we set aside sizeable sums in support of many charitable organisations and other worthy causes. Our subsidiaries are also playing their role as responsible corporate citizens. Malaysia Airports (Niaga) has organised various charity drives to coincide with their promotional events, the biggest being the Charity Gala Dinner in conjunction with the 9th Miss Tourism International Pageant 2004.
However, our involvement with the community may not always be in the form of a cheque donation. Sometimes, we find we can play a more meaningful role through our many outreach programmes. MAHB organises and coordinates visits and tours for school children, college and university students, members of the media, clubs and associations, employees of various government and private agencies. Such programmes are designed to inform and educate the public on what MAHB is all about, and the kinds of facilities and services we provide to serve the nation’s interest. It is not only kids but also the old folks who find a visit to the KLIA a real treat. On our part, we welcome such visits and in the true tradition of Malaysian hospitality, we try our best to make these airport tours memorable. In conjunction with KLIA’s 6th Anniversary celebrations, we hosted two separate tour programmes for 69 kids from an orphanage in Kuala Langat and 32 residents of an old folks’ home in Dengkil.
The Chairman, in his statement has mentioned the role we played in waiving the landing and parking charges for the ORBIS programme and in the world-wide relief effort to help the victims of the tsunami disaster. This is MAHB’s corporate contribution towards the tsunami relief effort, but I would also like to commend our people for responding so quickly and generously. Three associations within the Group, namely Masjid KLIA, Tabung Derma KLIA and Kelab Sukan Malaysia Airports each came up with a donation of RM10,000. Our Women’s Association AERONITA organised a drive to collect new and used clothing to be forwarded to the tsunami victims. In all these efforts, our people are demonstrating core corporate values of caring and sharing. 32-33 MANAGING DIRECTOR’S REVIEW OF OPERATIONS (cont’d.)
OTHER BUSINESS ACTIVITIES
MALAYSIAAIRPORTS MANAGEMENT & TECHNICAL SERVICES SDN. BHD. (MAMTS)
MAMTS’ core business is the provision of management, maintenance and technical services in connection with the airport industry. In line with other subsidiaries and operating divisions within MAHB, the company has been certified to MS ISO 9001:2000 quality management system in 2004. The scope of registration covers four broad areas, namely: provision of technical advisory and consultancy services for the management of airport cleaning services; management of airport cleaning services; monitoring of the quality of airport services; and provision of project management consultancy services.
MAMTS’ strengths lie in its considerable knowledge and experience in project and construction management. Over the years, the company has been responsible for providing airport management and technical services to ensure the smooth operations of the Group’s airports throughout Malaysia. With opportunities unfolding in the international marketplace, MAMTS is now ready to expand beyond national boundaries.
On 20 December 2004, MAMTS entered into a Technical Services Agreement with Hyderabad International Airport Ltd. (HIAL) to provide a range of services, such as reviewing the master plan, facilities planning, design review for technical and operations, operations and maintenance strategy and manpower planning. MAHB will also provide guidance on various certification requirements, advice on commercial strategies, service level standard, environmental matters, airport emergency planning, airport security planning, ICT strategy, value management and privatised packages on landside development. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
MALAYSIAAIRPORTS (NIAGA) SDN. BHD. (ERAMAN)
Malaysia Airports (Niaga) Sdn. Bhd., which operates under the brand name Eraman, is among the country’s largest airport retailers. Eraman has more than 40 retail outlets under its wing, carrying a range of merchandise to meet the varied tastes of the souvenir hunter to the most discerning global traveler. On the food and beverage (F&B) front, Eraman manages some 24 food and beverage outlets at the KLIA, with fares ranging from fast food to specialty dining, Oriental, Asian or Western style.
The year under review was a successful and memorable one for the It was also an activity-filled year for Eraman, company. Not only was the sales performance the highest since with promotional events organised for business started 10 years ago, but it was also a year of awards and almost every month of the year. These accolades. The commendable sales performance was attributed to promotional activities were organised in line improve traffic growth at KLIA, complemented by aggressive with MAHB’s efforts to promote KLIA as more promotional activities throughout 2004. Additionally, several new retail than just an airport. Shopping and dining and F&B outlets commenced operations during the year namely Palms are an integral part of the Airport Grill and Bar, Starbucks Coffee and the 1901 Hot Dog Kiosk. Among the Experience, and MAHB’s goal is to ensure accolades, Eraman received a Raven Fox Award for being placed that KLIA will be a pleasantly memorable among the top three in ‘The Best Travel Retailer Operating In A Single one. In many instances, the events Country In Asia/Pacific’ category. This award is a prestigious recognition organised by Eraman serve more than just in the travel retail industry. Eraman was also accorded Superbrand the promotional or publicity angle. Many of status by Superbrands Malaysia in May 2004. In its bid to strive for these events are organised around themes continual improvements, Eraman earned certification in October 2004 designed to showcase Malaysia’s myriad to MS ISO 9001:2000, the scope of registration covering the provision of attractions. Wherever possible without “Frontline Services for Airport Retail Operations”. Eraman was recognised forgetting its social commitment, Eraman and listed in the Malaysia Book of Records as the first Airport Retailer in also organises charity drive in conjunction Malaysia to receive the MS ISO 9001:2000 certification. with these events, with the proceeds going to charitable organisations. 34-35 MANAGING DIRECTOR’S REVIEW OF OPERATIONS (cont’d.)
The calendar of events was kicked-off by the ‘Stay Shop and For the third consecutive year, Eraman was one of the main Spend’ campaign held in collaboration with Pan Pacific KLIA. sponsors for the 9th Miss Tourism International Pageant 2004. Hotel guests were given discount vouchers to be redeemed The company also sponsored the Miss Eraman Elegance at participating retail outlets. In celebration of Mother’s Day International title, one of the subsidiary titles awarded at and Father’s Day, Eraman ran ‘The Greatest Love of All’ the pageant. Aptly themed “Bringing the World to KLIA”, campaign where exclusive greeting cards were presented to this is a part of Eraman’s initiative to put KLIA in the world’s all those who made purchases at Eraman outlets. In tourism map. Also in conjunction with the event, Eraman conjunction with the 6th Anniversary of the Food Garden, organised a charity gala dinner raising RM48,000 for four Eraman hosted the ‘Fiesta Makan-Makan’, featuring a charities. The year ended with the ‘Fun-Tastic Week’ dizzying array of local and international fare. In response to campaign’, a bazaar offering a variety of products for sale, the Government’s call to further promote the development food delights and fun-filled activities to keep the children as of SMEs, Eraman, collaborated with the Federal Agriculture well as the young-at-heart occupied. This was a memorable Marketing Authority (FAMA) and invited several local SMEs to end to an exciting year, and an appropriate way to display their products during the period. complement the year-end festive season.
Eraman has also taken to the air in its publicity campaigns. Together with Sistem Televisyen Malaysia Berhad (TV3), we came up with a programme ‘Seronok Berbelanja Di KLIA’ showcasing the best that KLIA had to offer in terms of retail MAB AGRICULTURE and F&B outlets. Then in conjunction with the National Day celebrations, Eraman ran a campaign ‘Proud To Be - HORTICULTURE Malaysian’ on a local radio station. As part of the festivities, SDN. BHD. (MAAH) the Eraman Merdeka celebration was held at the Main Terminal Building of KLIA, where fans were treated to MAAH’s principal activity is the cultivation and management performances by local artistes and an Australian pop group of the Group’s 7,225 hectares of plantations around the called North. KLIA and the Kota Bharu Airport, planted with oil palms and coconut trees. In 2004, MAAH derived a revenue of RM16 As a further effort to promote tourism, Eraman in a joint- million, 80% of which was generated by the sale of fresh promotion with Malaysia Airlines, launched the ‘Flights of fruit bunches. The company also undertakes some of the Shopping’ campaign in Vietnam, where discount vouchers horticulture-related activities of the Group, carried out on were given to passengers travelling by Malaysia Airlines. The 662 hectares of land around the KLIA and Subang Airport. vouchers enabled these passengers to enjoy exclusive discounts when shopping at KLIA. The ‘KLIA Ramadhan Fest 2004’ was organised during the Muslim holy month, reprising the overwhelming success of the previous year. The month- long Ramadhan Fest featured over 36 vendors and attracted more than 100,000 visitors. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
KL AIRPORTHOTEL SDN. BHD. (KLAH)
A wholly owned subsidiary of MAHB, KLAH is the owner of luxury class hotel known as Pan Pacific Hotel Kuala Lumpur International Airport.
For the fourth time in five years, the Pan Pacific KLIA has been voted the ‘Best Airport Hotel in Asia 2004’ by Business Asia Magazine and Bloomberg TV. One of the most sought-after prizes in the highly competitive Asia Pacific hotel industry, the award honours the top business hotels from 14 countries in 17 different categories. Judging is based on a range of criteria from special business services, business club and lounge facilities, conference and convention facilities to rewards programmes. Readers of Business Asia and viewers of Bloomberg TV vote for their favourite business hotel in participating countries.
With easy access to the KLIA, the Pan Pacific KLIA is not only the hotel of choice among business travellers but also among motor- sport enthusiasts as the only 5-star deluxe hotel within the vicinity of the SIC. The hotel’s well-appointed facilities include a 24-hour food and beverage outlet, a ballroom that can accommodate up to 1700 pax for receptions, a 184-seater auditorium, two business centres and wireless Internet access in the lobby and lounge areas. 36-37 MANAGING DIRECTOR’S REVIEW OF OPERATIONS (cont’d.)
MALAYSIAAIRPORTS TECHNOLOGIES SDN. BHD. (MA TECH)
As the Information Technology (IT) flagship company for the Group, MA Tech ensures maximum operability and performance of the KLIA Total Airport Management System (TAMS). MA Tech spearheads the Group’s Information Communication Technology (ICT) thrust to engage the market, presenting as range of ICT solutions and services.
MA Tech is working continually towards improving the TAMS through increased research and development (R&D) efforts centred on the assimilation of new technology and convergence of business needs. To this end, the Company has established strategic alliances with some of the biggest names in the ICT industry. These alliances have allowed MA Tech to expand its knowledge base and build a core team of experts in the various IT fields. In its efforts to improve on service delivery, MA Tech has adopted the best in industry practices to achieve process improvement.
ICT will continue to feature prominently in the group-wide effort to improve KLIA’s standing as a world-class airport. Projects to enhance the efficiency, productivity and performance of KLIA include the development and migration to GE Network technology, new gate allocation system and the upgrading of the baggage handling system.
MA Tech has retained its ISO 9001:2000 accreditation for four consecutive years, while its certification to OHSAS 18001:1999 has now entered its second year. Its other credentials include the BS7799 Part 2:2002 Certification, an internationally recognised standard for Information Security Management Systems. MA Tech personnel have also obtained the IT Infrastructure Library (ITIL) Certificates for IT Service Management. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
ASIAP ACIFIC AUCTION CENTRE SDN. BHD. (APAC)
Through APAC, the Group also operates an auction centre located at Subang. During the year, the Ministry of Finance appointed APAC as its agent for the disposal of assets belonging to various government ministries. APAC posted an operating revenue of RM9.4 million for the year under review. A total of 75 auctions were held in 2004, to dispose of vehicles, machinery and general goods. APAC also organised a 2-day regional machinery auction at its main premises in Subang. The company’s revenue stream has been boosted by event management activities staged at APAC’s premises, such as the 9th Defence Services Asia Exhibition and Conference and the 15th International Exhibition on Precision Engineering, Machine Tools and Metalworking Technology.
SEPANGINTERNATIONAL CIRCUIT SDN. BHD. (SIC)
As a subsidiary of MAHB, SIC aspires to be the hub motorsports and to promote the world-class Sepang F1 Circuit as a key destination for motorsports activities including motocross and 4x4 off- road events. Apart from the prestigious Formula One Grand Pix, other motorsports events organised by SIC in 2004 included the Marlboro Malaysian Motorcycle Grand Prix, the Japan GT Championship Malaysia, the first ever Formula Nippon Championship Malaysia, the 12-hour Merdeka Millennium Endurance race and a six-round Malaysian Super Series. 38-39 MANAGING DIRECTOR’S REVIEW OF OPERATIONS (cont’d.)
A NEW TAKE-OFF PHASE
We are hopeful that the coming financial year will continue to be a good one for the aviation industry and our business of operating airports. We believe that passenger movements at all airports operated by the Group will continue to grow. We are not sparing any effort to attract more airlines to hub at KLIA. Traffic growth will also come from the expanding activities of the LCC, more charter flights from countries like China, higher frequencies of certain flights and addition of new destinations.
Operationally, 2005 will be a very busy and eventful one with several projects ready to take-off. The contract for a new check-in system at the KLIA has already been awarded, and system commissioning is expected to take place in October 2005. The upgrading of the gate allocation system will be carried out in stages, with the first phase due for completion in August 2005. The second phase will be completed in January 2006.
Also high on our list is the development of a Low Cost Carrier Terminal at KLIA. The project is targeted for completion by early 2006. Other priority projects include improvement and redevelopment works for various airports operated by the Group. At the Penang International airport, the construction and completion of runway resurfacing and associated works are progressing as planned for due completion in August 2005. The redevelopment of the Kuching International Airport, Sultan Abdul Halim Airport in Alor Star, Sultan Mahmud Airport in Kuala Terengganu and the Sibu Airport in Sarawak are in progress. Targeted completion dates are staggered, ranging from end-2005 to March 2008. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
We are also gearing up to meet the requirements of the Airbus 380 (A380) aircraft in compliance with the ICAO Code F requirements. A proposal has already been submitted to the Government and we are presently in the planning stage to upgrade various facilities. The project is scheduled for completion by the end of 2006, in time for Malaysia Airlines to commence A 380 flights the following year. In the meantime, we are already making presentations to ground handlers and other relevant parties in readiness for the inaugural A 380 flight. Because of the lead-times involved in getting some projects off the ground, we need to plan ahead. While the Low Cost terminal under construction will effectively boost the KLIA’s passenger handling capacity by another 10 million pax per annum, we are already planning for Phase II Development of the KLIA. In this regard, we are conducting a review of the KLIA Master DATO’ SERI BASHIR AHMAD ABDUL MAJID Plan to ascertain the development requirements to cater Managing Director for a handling capacity of 45 million pax per annum. The Government will decide on the date of implementation of the Phase II Development.
As a Group with vast ambitions for the future, we are beginning to transform into concrete plans of action some of the infinite possibilities open to us. The coming years will also see the increasing internationalisation of our operations adding a new chapter to our corporate history. MAHB remains very much an unfolding story. KLIA – THE AIRPORT CITY OUR AIRPORT IS AN ADVENTURE Being lost is an adventure in itself. Especially when there are so many things to tempt you. FOR SOME Just like our airport. Just like our city. 42-43
Calendar Of Significant Events
23 February 2004 First Ever Human Resource Meeting for Asean Airports Authorities Launched The first-ever Human Resource Development Working Group Meeting for ASEAN International Airports Association (AAA) was launched with topics discussed include the establishment of AAA Human Resource Development Working Group and sports activities which will be lead by Malaysia.
10 February 2004 Dialogue Session Between Managing Director MAHB and Media Editors YBhg. Dato’ Seri Bashir Ahmad (Managing Director MAHB) held a dialogue session with the local printed media agencies. The purpose of this dialogue session was to educate and 18 March 2004 update the media on current Malaysia Airports Welcomes Lufthansa’s development and address various issues Inaugural Flight to KLIA pertaining to Malaysia Airports. Malaysia Airports welcomes Lufthansa German Airlines’ inaugural flight to KLIA, marking one of the biggest achievements of Malaysia Airports marketing efforts. Lufthansa starts operating four flights weekly on the Frankfurt – Kuala Lumpur vice versa route. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
30 March 2004 Qatar Airways Increases Frequency To KLIA Qatar Airways increased its frequency from five to daily flights for the Doha – Kuala Lumpur route. A welcome reception was held to mark this event at KLIA.
19-21 March 2004 Petronas Malaysian Grand Prix 2004 16-20 April 2004 Sepang International Circuit again Malaysia Airports Sports Carnival played host to this international Employees of Malaysia Airports and its event where thousands of spectators subsidiaries gathered in Kuantan, thronged the circuit to watch it Pahang for the Malaysia Airports live while thousands Formula 1 fan Sports Carnival 2004, which saw around the world watched the Malaysia Airports (Sepang) Sdn. Bhd. live telecast. emerged as the overall winner.
11-15 April 2004 APAC Hosted DSA 2004 Asia Pacific Auction Centre (APAC) hosted the Defence Service Asia (DSA) 2004 from 11-15 April 2004. The 9th DSA, which drew some 20,000 visitors, provided opportunities to Malaysian companies to showcase their capabilities and expertise in the defence-related industry. The exhibition was described by YB Datuk Seri Najib Tun Razak, Deputy Prime Minister as a high quality exhibition and a great success. 44-45
Calendar Of Significant Events (cont’d.)
12 April 2004 New Terminal Building for Kota Bharu Airport Launched The Sultan of Kelantan, accompanied by YB Dato’ Sri Chan Kong Choy, Minister of Transport Malaysia, officially launched the Sultan Ismail Petra Airport in Kota Bharu in a glorious ceremony attended by hundreds comprising guests and media. The launching was held in conjunction with the celebration of DYMM Sultan Kelantan’s birthday celebration.
26 April 2004 Second Annual New Route Asia Launched Malaysia Airports hosted the second edition of New Route Asia, which attracted more than 150 airports and airlines delegates launched today at the JW Marriot Hotel, KL. The forum was 5-9 May 2004 designed to bring airlines and airports together to discuss future market APAC Hosted MTA 2004 opportunities, with the reputation of APAC hosted the 15th International Exhibition on Precision being the only regional event focused Engineering, Machine Tools and Metalworking Technology (MTA) entirely on the development of air featuring a wide range of precision engineering, machine tools and services within the Asia Pacific region. metalworking technology for the IT, Electrical, Electronics, Shipbuilding, Aerospace and Automotive industries. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
13 May 2004 KLIA the First Airport in Asia Pacific to Achieve Aerodrome Certification KLIA received its Aerodrome Certification from Department of Civil Aviation (DCA), certifying that the ultra-modern airport has been audited and meets the Aerodrome Certification requirement by International Civil Aviation Organisation (ICAO). KLIA was the first airport in Asia Pacific region to achieve the recognition.
27 May 2004 Malaysia Airports Annual General Meeting Malaysia Airports held its fifth Annual General Meeting (AGM) at Pan Pacific Hotel KLIA during which the Group’s 2003 financial results were tabled and adopted.
24 May 2004 27 May 2004 KLIA The First Environmental Friendly Fire Emergency And Evacuation Drill At KLIA Airport In Asia Pacific To ensure all agencies at KLIA are always well prepared in case KLIA received the Green Globe 21 of fire emergency at KLIA and to ensure evacuation at the certification, which made it the first designated zone and floor of building is carried out in an orderly environmental friendly airport in Asia and smooth manner, Malaysia Airports conducted a Fire Pacific. Green Globe is a global Emergency and Evacuation Drill at Zone 5, Ground Level, Main environmental program for the Terminal Building, KLIA today. This drill was also to test and travel and tourism industry. evaluate the effectiveness of Airport Emergency Procedure (AEP) for fire evacuation emergencies at KLIA. 46-47
Calendar Of Significant Events (cont’d.)
30 June 2004 KLIA Celebrates 6th Anniversary KLIA celebrates its 6th anniversary today, marking it with receptions for its 93rd million passenger (total) and 30th million passenger (domestic). The celebration included cake cutting and free rides in Airport Limo’s brand new Jaguar S-Type Limo for the two lucky passengers.
19 June 2004 Malaysia Airports Received MS ISO Certification Malaysia Airports received yet another certification from SIRIM Berhad when its Training Centre in Penang received the MS ISO 9001- 2000 Quality Management System. The scope of registration for this certification includes the provision of civil aviation security and fire fighting trainings at airports. 1 July 2004 & 31 December 2004 Human Performance Management Release 3 & 4 For the year 2004, it was roll out to the Executives and Supervisory level of the population involving 1208 stakeholders. The HPM includes developing the HPM Guide, HPM Forms and ratings, Personal Career Guide, Policies & Procedures, Incorporated HR support structures and Coaching & moderation exercises to all stakeholders. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
15 July 2004 Limbang New Airport Commenced Operations 3 July 2004 Another milestone in the nation aviation’s history was written today when Limbang Orphans Visit to KLIA Airport relocates to a new and modern In conjunction with KLIA’s 6th airport, situated 4.8km from Limbang anniversary celebration, Malaysia town. It has the capability to handle up Airports organised a visit from to 250,000 passengers annually and the Pertubuhan Rumah Anak Yatim apron is capable of handling two Fokker Miskin, Daerah Kuala Langat, 50 and one Twin Otter at any one time. Sungai Buaya. A total of 69 orphans visited the Main Terminal Building and Satellite Building. At the end of the visit, Encik Azmi Murad presented RM6,000.00 from Tabung Derma KLIA to the home.
17 July 2004 Launching of Fiesta Makan-makan @ KLIA Promotion by Eraman Malaysia In conjunction with KLIA’s 6th anniversary, Eraman Malaysia launched 20 July 2004 the Fiesta Makan-makan @ KLIA promotion which was held from 17 to 31 Old Folks Visit From Yayasan Al-Jenderami To KLIA July 2004. The fiesta was aimed at promoting a variety of local and In conjunction with KLIA’s 6th anniversary international delicacies available at KLIA. celebration, Malaysia Airports organised a visit from old folks home, Yayasan Al-Jenderami, Jenderam Hilir, Dengkil, Selangor to KLIA. To discover and experience the airport’s operations, 32 from the old folks home visited the Airside Area and Satellite Building KLIA. 48-49
Calendar Of Significant Events (cont’d.)
28 July 2004 12th Foreign Carrier for Penang Korean Air became the 12th foreign carrier to operate to Penang International Airport when its maiden flight touched down today. Korean Air operates three flights weekly on Mondays, Wednesdays and Fridays. A welcome reception was organised to commemorate the inaugural flight.
1 August 2004 Cabin Luggage Control Policy At Airports Effective today, all airlines operating in Malaysia enforced the ‘one passenger, one cabin luggage’ rule for domestic and international flights. This policy controls and restricts the number and size of hand luggage allowed into the cabin of aircraft as recommended by International Air Transport Association (IATA). Malaysia Airports as the operator of airports in Malaysia provides full support to facilitate the implementation of the policy.
7 August 2004 Media Hunt And Golf Challenge 2004 Malaysia Airports organised a Media Hunt and Golf Challenge 2004 with the objective to further enhance its relationship and networking with the media. More than 50 cars took part in the Media Hunt 2004, which was flagged off at Malaysia Airports headquarters and ended at A’Famosa Resort while 23 members of the media pitted their skills at A’Famosa Resort Golf Course. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
1 September 2004 11 September 2004 Seronok Berbelanja Debuts On TV3 Malaysia Airports Employees Completed the UMCCED Study Beginning 1 September 2004, TV3 and Eraman Thirty Malaysia Airports personnel successfully completed their collaborated to produce a brand new segment titled Executive Diploma in Management course conducted by the ‘Seronok Berbelanja Di KLIA’ and this segment will provide UMCCed. Twenty eight of them received their diplomas on tips as well as bring viewers to the locations to find out 11 September 2004 in a Convocation Ceremony held at the what’s new, what’s different and what’s hot at the Dewan Tunku Canselor, University Malaya. shopping and food outlets in KLIA.
18 September 2004 Malaysia Airports Increased its Aviation Security Personnel Malaysia Airports beefed up security level at all airports under its operations when 256 aviation security trainees completed their aviation Security Assistant Basic Course. The fitting of new uniforms, with identical colour and specifications to that of the Royal Malaysian Police Force (PDRM), for all its airport Auxiliary Police officers and personnel was also introduced during the same ceremony. 20 September 2004 Flights Of Shopping In a joint promotion with Malaysia Airlines, ‘Flights Of Shopping’ campaign was launched in Vietnam today to further reward travellers and encourage them to shop and spend at Eraman Malaysia outlets in KLIA. The objective of this campaign was to strengthen and promote the Eraman brand among travellers as well as to build a strategic alliance with Malaysia Airlines. 50-51
Calendar Of Significant Events (cont’d.)
26-28 September 2004 Malaysia Airports Takes Part In Routes Malaysia Airports took part in the 10th World Route Forum (Routes) in Madrid, Spain with the aim to attract new airlines to Malaysia and to encourage those already flying here to expand their network out of KLIA. At the forum, Malaysia Airports also launched the KLIA e-timetable, becoming the first airport in Asia to offer air travelers such a facility.
8 October 2004 Launching of the KLIA Ramadhan Fest 2004 Malaysia Airports (Niaga) Sdn. Bhd. (Eraman) today launched the Ramadhan bazaar at KLIA which was officiated by YB Datuk Dr. Leo Michael Toyad, Minister of Tourism, Malaysia. During the same ceremony, representing 8-10 October 2004 Malaysia Airports, Dato’ Seri Bashir Ahmad, SIC Hosts Another Edition of MotoGP presented a RM5,000.00 cheque to Qalam Sepang International Circuit hosted the 5th Afghanistan as a contribution towards the Marlboro Malaysian Motorcycle GP where construction of an education centre in Kabul, thousands of spectators watched it live at Afghanistan. the circuit while other motor racing enthusiasts all over the world watched the live telecast. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
28 October 2004 Orphans & Single Mothers were all smiles at the KLIA Mosque Held at the KLIA Mosque in conjunction with the month of Ramadhan, Malaysia Airports, in collaboration with the Pan Pacific Hotel Kuala Lumpur International Airport, brought smiles to orphans and single mothers by giving away duit raya and other daily needs.
12 October 2004 Familarisation Tour at KLIA 30 October 2004 Malaysia Airports organised a familarisation tour Eraman Malaysia Entertained 80 Orphans to related areas involved in emergency at KLIA situation at KLIA for all the internal and external Eighty orphans from the Persatuan Anak- agencies. On the same day, the RM2 million Anak Yatim/Miskin Kuala Langat and the aircraft simulator, specialy built for aircraft crash Rumah Laki-Laki Tun Abdul Aziz, Melaka training, was revealed. were entertained by Eraman in a joyful atmosphere at KLIA. The ceremony, Malam Sekalung Budi Jalinan Kasih was held to cheer and entertain the less fortunate children. During the ceremony, 22 November 2004 Eraman Malaysia gave away some Orbis Flying Eye Hospital at Subang Airport clothes and duit raya to these children. 34 Malaysians boarded the Orbis Flying Eye Hospital, in form of DC-10 aircraft and received the gift of sight when it utilised Sultan Abdul Aziz Shah Airport, Subang for its base from 22 November 2004 to 2 December 2004. Vertus Barak, Administrator Coordinator of ORBIS in complimented the airport staff for their support and commitment towards the success of the programme. 52-53
Calendar Of Significant Events (cont’d.)
12 December 2004 Mesra Aidilfitri Malaysia Airports At Majlis Mesra Aidilfitri held at the Pan Pacific Hotel Kuala Lumpur International Airport, Malaysia Airports treated orphans and disabled children with a variety of kuih raya. During the ceremony held as part of Malaysia Airport’s effort to promote a loving and caring society, the children were also presented with duit raya as well as their daily needs and school gears.
1-2 December 2004 Regional Machinery Auction held at APAC APAC’s inaugural 2-day regional machinery auction was held on 1-2 December 2004 at the main premises in Subang, Selangor and the following day at third party premises in Bentong, Pahang. The auction, which was anchored by an internationally renowned West European engineering company and a leading Malaysian Main Board public listed 18 December 2004 company, boasted sales totalling RM5.5 million, Miss Eraman Elegance International 2004 Charity Gala Dinner including successful sale of an 80-metre steel cargo Miss Maria Gabriela Perez from Venezuela was crowned Miss ship for RM1.15 million. Eraman Elegance at the Gateway Ballroom of the Pan Pacific Kuala Lumpur International Airport which was organised by Eraman. Miss Eraman Elegance International is one of the subsidiary titles offered in the Miss Tourism International 2004 pageant. Aptly themed, the event is called “Bringing The World To KLIA” as a further effort to put KLIA on the world’s tourism map. MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT
19 December 2004 KLIA Hot Fun Run Pan Pacific Kuala Lumpur International Airport organised a charity event namely, ‘KLIA’s Hot Fun Run’. The objective of the event is to raise funds in support of Nilai Cancer Institute Research Fund and as well as to create a unique annual event at KLIA. Participation in the event is by donation of RM500.00 per team 21 December 2004 comprising of ten team members. Funds generated from the Malaysia Airports Signed Two Agreements event was donated to the Nilai Cancer Research Fund. For Hyderabad International Airport Witnessed by YAB Dato’ Seri Abdullah Hj. Ahmad Badawi, Prime Minister of Malaysia, Malaysia Airports signed two agreements in regards to the development of Hyderabad International Airport, India. Malaysia Airports is the first airport operator company in South East Asia to be given the concession for the development of the airport in India. It is also the first overseas venture in India for Malaysia Airports.
31 December 2004 Donation To Malaysian Tsunami Disaster Fund Malaysia Airports today donated RM30,000.00 to NST-BH- TV3-8TV Malaysian Tsunami Disaster Fund with the hope to help ease the pain and suffering of the victims. Masjid KLIA, Tabung Derma KLIA and Kelab Sukan Malaysia Airports (KESUMA) contributed RM10,000.00 each for this donation. KLIA – THE AIRPORT CITY WHERE COMFORT EQUALS We try our very best to make it as difficult as possible NEVER WANTING TO LEAVE for you to leave our airports. Most people get so comfortable, they always leave hoping to return.