June 12 (Bloomberg) -- Malaysia Airports Holdings Bhd. plans to convert some oil-palm plantations surrounding Kuala Lumpur’s main air terminal into attractions such as theme parks, concert halls and golf courses to lure businesses and visitors.
A factory outlet venture with Mitsui Fudosan Co., Japan’s biggest developer, will open in the area next year, and new towns have sprung up near the airport that will help the zone dubbed KLIA Aeropolis grow, Chief Financial Officer Faizal Mansor said in a June 10 interview. Malaysia Airports has about 22,000 acres (9,000 hectares) of land in Sepang, where the international airport and a Formula One track are located.
“I don’t think any other airport in the world has got the kind of land bank that we have,” Faizal said. As the area gets more developed, “the airport then slowly becomes less and less a destination for passengers to take a flight, more and more a destination by itself.”
Malaysia competes with neighbors including Singapore and Thailand for tourism and foreign direct investment. The country opened the world’s largest terminal for low-cost carriers last month to tap rising air travel among Asian consumers. Sepang-based AirAsia Bhd., which has grown into the region’s biggest budget airline in the past decade, has contributed to a doubling in visitors to Malaysia in that period.
The country had 25.7 million visitors and collected 65.4 billion ringgit ($20.4 billion) in tourism receipts last year, according to Tourism Malaysia. The government targets 36 million tourists a year and 168 billion ringgit in receipts by 2020.
Arrivals this year have been dented by the disappearance of a Malaysian Airline System Bhd. jet three months ago during a flight from Kuala Lumpur to Beijing. Tourists from China, the country’s third-largest source of visitors, canceled their trips while travel agents there boycotted the airline.
Malaysian Air’s bookings from China dropped 50 percent to 60 percent after Flight 370, carrying mostly Chinese passengers, vanished March 8, Hugh Dunleavy, the airline’s director of commercial operations, said last month.
The national carrier is speeding up an overhaul of its business as the missing airplane places additional stress on its operations that have lost a total 4.57 billion ringgit since the start of 2011. Malaysian Air will review all routes, it said.
Shares of Malaysia Airports rose 0.3 percent to 7.70 ringgit in Kuala Lumpur today. They have fallen about 14 percent this year after surging 73 percent in 2013. The benchmark FTSE Bursa Malaysia KLCI Index has climbed 0.4 percent in 2014.
The stock’s decline has partly been due to investor concern amid speculation of a possible Malaysian Air bankruptcy, Faizal said. Bankruptcy for the carrier is not an “option at this stage,” according to Dunleavy.
Future developments for KLIA Aeropolis include more than 300 acres set aside for a cargo and logistics park, more than 500 acres for a theme park and land exceeding 100 acres for offices, according to presentation slides from the company.
Malaysia Airports plans to develop the old budget terminal site into a logistics hub for cargo facilities once main tenant AirAsia relocates its headquarters, Faizal said. This will help Malaysia catch up with centers in Singapore and Bangkok and compete for a larger share of the air cargo market, Khair Mirza, senior general manager of planning, said in the same interview.
AirAsia will start building its headquarters at the new budget terminal next month with completion targeted for the end of 2015, Bernama news service reported June 4, citing Chief Executive Officer Aireen Omar.
Kuala Lumpur International Airport might overtake Singapore’s Changi Airport in passenger traffic in two to three years at current growth rates, Faizal said. KLIA handled about 47.5 million travelers last year while Changi Airport had 53.7 million passengers. Passenger traffic is projected to grow 10 percent this year in Kuala Lumpur, he said.
The company is also in discussions with Malaysian Air to relocate about 8,000 of the carrier’s employees to the vicinity of Kuala Lumpur International Airport. They are now based in the suburb of Subang about 30 minutes away from the city center.
“To get Malaysia Airlines to move to KLIA would be a massive catalyst for us,” Faizal said. “These are things that will further stimulate development in KLIA to become an airport city by itself.”
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