THE NEXT STEP

Asia-Pacific Airports finds out more about the blueprint for a pioneering aerotropolis development at Kuala Lumpur International Airport.

Malaysia Airports has unveiled plans for what it claims is its “most exciting endeavour” to date, the creation of a huge, national economy boosting aerotropolis at Kuala Lumpur International Airport (KLIA).

Identified as one of the strategic pillars in the airport operator’s five-year business plan, Runway to Success 2020 (RtS2020), it describes the planned aerotropolis as an “eco-system development that is synergistic with the airport business and aligned with Malaysia’s development agenda”. 

Effectively a blueprint to transform Malaysia’s busiest gateway into a “world class airport city” and tourist destination in its own right, Malaysia Airports calls the project KLIA Aeropolis, and admits to being inspired by airport city developments at Amsterdam Schiphol, Frankfurt, Incheon and other gateways across the globe. 

Success in its endeavours, states Malaysia Airports, will signal its transformation from an infrastructure provider to a key economic enabler by contributing significantly to the national GDP and job creation. 

“We have decided to develop KLIA Aeropolis in response to the demand that exists for businesses and trade to thrive in an environment that offers connectivity, speed and agility in one place,” says Datuk Badlisham Ghazali, managing director of Malaysia Airports.

“Asia and ASEAN countries are the new emerging economies with ASEAN GDP expected to double by 2020 to $5 trillion. Meanwhile, Malaysia, with its location in the heart of ASEAN as well as its extensive air and ground network, and ready pool of skilled talent, is expected to experience GDP growth of 4.9% per annum up to 2020.  

“The decision was taken in tandem with the intention of establishing KLIA as the preferred ASEAN hub, which is also one of our RtS2020 strategic pillars.” 

He goes on: “We have come a long way since our days at the former Subang International Airport where we served 16 million passengers per year. Today, KLIA caters to nearly 50 million passengers per year, with over 60 airlines serving more than 130 direct destinations, and there is much more to come as the potential for air traffic growth within the Asia-Pacific region is vast.”

KLIA’s land bank of over 100 square kilometres certainly gives it a distinct advantage over most other gateways in terms of having space to grow and develop.

And with only a fraction of it used today and just 60% of the site set aside for aeronautical use, the airport has an abundance of land available for the development of non-aviation related commercial activities.

“The land designated for airport and aeronautical use will serve the core airport growth needs over the long-term,” explains Badlisham.

“The rest will be clearly demarcated into zones comprising Airport Central, which will serve as the core commercial area; a business park functioning as a secondary commercial area; an aerospace park, logistics park and aeronautical support zone to cater to aviation-linked businesses; and a leisure and recreational zone.”

Demand-driven initiative

According to Malaysia Airports’ development strategy, KLIA Aeropolis will be a demand-driven project initially centred on three key clusters – Air Cargo & Logistics; Aerospace & Aviation; and MICE & Leisure. 

As a result, plans are on the drawing board for a Cargo Logistics Park, Aerospace Park and a Aeronautical Support Zone for MRO (Maintenance, Repair, Overhaul) services across 90, 100 and 200 acre plots respectively with the airport operator admitting that it is considering a number of options for funding and developing the projects.

“Various financing options and development structures are being evaluated to ensure the maximum value to the airport,” says a spokesman.

“These include BOT type projects funded by private investors but built on land owned by Malaysia Airports and leased to them on long-term contracts.

“We will create value through smart partnership and synergistic collaboration with our business partners in order to achieve mutual benefits.”

Malaysia Airports reveals that all future developments for the MICE & Leisure cluster will follow the successful joint venture model it adopted with Mitsui Fudosan for the highly popular Mitsui Outlet Park KLIA at Sepang,
six kilometres from the airport.

The existing Sepang International Circuit, used for Formula 1’s Malaysian Grand Prix, sits within the area allocated for leisure and recreation/MICE related projects. 

“We are very clear in our KLIA Aeropolis development strategy,” says Badlisham. “The clusters identified are synergistic to the larger airport system and will serve to not only benefit the airport operator but also the aviation supply chain as a whole.”

Talking about the Air Cargo & Logistics cluster, Badlisham notes that express cargo shipments at KLIA have grown by 33% since 2010, mirroring the growth of the e-commerce market in South East Asia, which is expected to account for $35 billion worth of business annually by 2018.

And with intra-Asian airfreight projected to grow by an average of 6.5% per annum up to 2033, he believes the future potential of air cargo for KLIA is clear for all to see.

He says: “We aim to facilitate a more cohesive KLIA cargo community through establishing and implementing agreed performance standards and exploring shared databases to capture cargo flows and improve network connectivity through targeted marketing initiatives to airlines and forwarders.

“In addition, we aim to strengthen the destination offer by expanding the free commercial zone and providing adequate capacity for growth, and the modern new supply chain facilities, that will support growth in e-commerce, perishables and other high value, time-sensitive supply chain shipments. 

“We are targeting an annual long-term forecast of 2.5 million to three million tonnes by 2050, from about 726,000 tonnes today. KLIA Aeropolis will serve as the core of our air cargo and logistics eco-system that extends to Penang and East Malaysia.”

He is also confident that KLIA Aeropolis has the potential to become a leading centre for aerospace development, pointing out that the country’s appeal to the industry has already led to over 300 companies setting up operations in Malaysia, a quarter of which are based at either KLIA or Subang, the capital city’s other gateway.

This boom has led to the country formulating a clearly defined national aerospace blueprint that aims to position Malaysia as a leading player in the global aerospace value chain. 

Within the aerospace sector, Malaysia Airports is determined to capture a significant portion of the offshoring activities performed by original equipment manufacturers (OEM) and first-tier aerostructure manufacturers who are looking to South East Asia in order to leverage on its cost competitiveness, ready talent pool, and available infrastructure.

“Boeing and Airbus tell us that 30% of all their aircraft deliveries today are to the Asia-Pacific region,” comments Badlisham. 

“APAC also accounts for 21% of the global MRO market demand and is expected to grow at 4.6% per annum for the foreseeable future. Our aim is to capture at least 5% of the global market share.”

He adds: “As a result of this strategy, KLIA Aeropolis will enable an aviation business eco-system by leveraging on businesses such MROs and OEMs. It will function as the core of Malaysia Airports’ aerospace belt, which includes Subang and Melaka airports. 

“Our focus on attracting first-tier aerostructure manufacturers is also expected to drive the growth of second-tier set-ups.”