This article first appeared in The Edge Malaysia Weekly on March 13, 2023 - March 19, 2023

MALAYSIA Airports Holdings Bhd (MAHB) has reached out to as many as eight companies, seeking a request for proposal (RFP) for the companies to undertake repairs to the aerotrain currently connecting KL International Airport’s (KLIA) Main Terminal Building and the Satellite Building, sources say.

In an email response to The Edge, MAHB says, “We have, thus far, invited eight companies, both local and international, to give us a proposal for the rectification and maintenance of the existing aerotrain so that it can sustain operations with high serviceability while waiting for the new aerotrain replacement project to complete. In the meantime, to ensure passenger convenience, we have embarked on providing additional shuttle bus service plying between the Satellite Terminal and Main Terminal. We have, thus far, brought in an 12 additional buses, from the existing 18 buses.”

According to sources, MAHB is said to have approached China’s CRRC Corp Ltd; Germany’s Siemens AG; South Korea’s Hyundai Rotem; Thailand’s BTS; Japan’s Mitsubishi Heavy Industries; Bombardier, which is a unit of France’s Alstom; and two local companies, SMH Rail Sdn Bhd and Hartasuma Sdn Bhd.

However, considering the contract value to repair the existing aerotrain — understood to be below RM10 million — it is not known if some of the larger companies will be keen to submit an RFP. It is understood that there are requirements pertaining to bumiputera shareholding in the companies, which may further deter participation.

“It’s not so straightforward as just getting someone to fix the trains … with the ringgit at above 4.50 to the US dollar, it would not interest some of the larger companies.

“The contract is only valued at US$2 million-odd; maybe the local players and the smaller outfits approached will bite, but not the bigger boys,” one source says.

Another source commends MAHB for looking to fix the problems with the aerotrain but questions why repairs were not done earlier if it cost only RM10 million.

To recap, the KLIA aerotrain suffered a breakdown earlier this month and the train stopped mid-way between KLIA and the Satellite Building. Although a second train was immediately sent to pick up and ferry the passengers for the rest of the journey, it got into difficulties as well and stopped, resulting in the passengers having to walk to the Satellite Building.

It is learnt that there are three sets of trains, all unable to function and that the repairs on the aerotrain are meant to sustain its usability until March 2025.

By then, there ought to be new aerotrains under the contract awarded to Pestech International Bhd.

In late 2021, Pestech had secured a RM742.95 million contract for the design, supply, installation, testing and commissioning for the aerotrain and associated works, involving an upgrade of the KLIA aerotrain, and maintaining it for a 10-year period starting March 2025.

However, there are understood to be delays with this project, but details are scarce.

Note that last November and in January 2023, three Pestech officials were charged by the Malaysian Anti-Corruption Commission (MACC) for misappropriating some RM10.6 million worth of assets.

Questions are being asked as to whether the maintenance of the aerotrain falls under Pestech’s scope, as claimed by some of the bidders who lost out on the RM742.95 million contract for the design, supply, installation, testing and commissioning of the aerotrain system.

In Pestech’s announcement on the contract award in late 2021, it said, “The rehabilitation works of the existing 1.2km of automated people mover (APM) infrastructure will be implemented while the service of the APM between the Main Terminal Building and Satellite A Terminal is to be maintained under minimal interruption during all phases of the project.” It is not clear from the announcement if the maintenance falls under Pestech’s purview.

It is also not known why Pestech’s partner in the RM742.95 million contract — Bombardier — was not tasked with fixing the aerotrain, instead of undergoing the longer route of asking for RFPs, as the value of the contract is likely to be small at below RM10 million.

The current aerotrain is a Bombardier Innovia APM 100, and Pestech is slated to upgrade the rolling stock to the Innovia APM 300.

In response to questions on the overhaul and mid-life refurbishment of the aerotrain sets, MAHB says, “We undertook minor and major overhaul of the aerotrains since 2012 as recommended by the OEM (original equipment manufacturer). The most recent minor overhaul was done between 2017 and 2019.”

According to sources, the KLIA aerotrain was built in 1998 and in 2017 underwent a major overhaul and part replacement, which is traditionally undertaken after eight years of operations. A mid-life refurbishment, which is usually undertaken after 15 years of operations, was never done.

It is also understood that MAHB had been approached by companies to overhaul the aerotrain since 2017, but it was not done. When asked about this, MAHB says “There was a detailed and strategic study conducted by an appointed consultant. The study recommended the replacement of the overall train system.

“It had also proposed short- and medium-term solutions for MAHB to implement while waiting for the full replacement to complete. Since then, we have implemented measures and initiatives to sustain the overall system while managing constraints related to parts obsolescence and old technology.”

MAHB, which is 33.21%-controlled by sovereign wealth fund, Khazanah Nasional Bhd, operates all 39 airports and landing strips in the country, with the exception of Senai Airport in Johor Baru, which is controlled by tycoon Tan Sri Syed Mokhtar Albukhary’s MMC Corp Bhd.

For its financial year ended December 2022 (FY2022), MAHB chalked up a net profit of RM187.2 million on the back of RM3.13 billion in revenue. In FY2021, MAHB suffered a net loss of RM766.44 million on RM1.67 million in turnover.

MAHB’s net cash from operating activities as at end-2022 was RM1.04 billion.

As at end-December last year, MAHB had cash and cash equivalents of RM1.53 billion while on the other side of the balance sheet, it had long-term debt commitments of RM4.14 billion and short-term borrowings amounting to RM697.32 million. The airport operator had shareholders’ funds of RM7.43 billion and retained earnings of RM1.25 billion as at the end of last year.

On its prospects, MAHB says it “is pivoting towards a propensity for growth, making concerted efforts in seeking out revenue generation and actively unlocking untapped opportunities to strengthen its financial position.

“In addition, MAHB continues to take pre-emptive measures in implementing cost optimisation plans [and will] continue its cash conservation measures. These measures include recalibrating operational efficiencies, that is, rebasing cost, operational process flow review and prioritising capital expenditure to conserve cash reserves to ensure that the group is able to meet its financial and operational obligations.”

MAHB ended trading last Friday at RM6.78, which translates into a market capitalisation of RM11.35 billion.

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