GIP committed to growth of MAHB and its journey to become world-class airport operator

Sunday 30 Jun 2024

KUALA LUMPUR (June 21): Considerable discussion has surrounded the involvement of Global Infrastructure Partners (GIP) in the Gateway Development Alliance (GDA), a consortium that announced an offer to acquire Malaysia Airports Holdings Bhd (MAHB) (KL:AIRPORT) on May 15.

GIP is a leading infrastructure investor that manages US$112 billion (RM527.97 billion) of assets on behalf of its investors, which comprise about 500 institutional investors globally. GIP specialises in investing in, managing and operating some of the largest and most complex infrastructure businesses in the world, including several airports.

GIP is convinced of the potential of both MAHB and Malaysia, and believes that the GDA can grow MAHB through initiatives that will enhance the passenger experience, increase airline connectivity, and upgrade airport infrastructure. It is confident that these initiatives will provide lasting economic benefits, not only for MAHB and its stakeholders, but also for Malaysia’s economy.

Bernama spoke with Phil Iley, the head of transport at GIP and a director of the GDA, to discuss GIP’s expertise, its intentions for MAHB, and to address some of the criticism that has been directed at the deal.

1. Why is GIP interested in MAHB? What potential do you see in it and Malaysia?

We are pleased to have submitted our offer for MAHB alongside our Malaysian partners, the ultimate parent companies of Khazanah Nasional Bhd and the Employees Provident Fund (EPF). We consider Malaysia to be a very attractive Asean country to be investing in, as it is at the heart of the fastest-growing region for air travel.

At GIP, we seek to invest in large infrastructure assets across the globe that provide essential services and support economic growth. MAHB has excellent prospects to regain its market position, and to improve its network connections, which have underperformed in recent years.

The GDA’s offer is an opportunity to apply our expertise to deliver improvements at MAHB that will benefit all stakeholders, including passengers, airlines, staff, and the broader set of businesses that interact with MAHB’s airports, ranging from tourism to manufacturing. We and our partners are optimistic, and are committed to putting in the work to take MAHB to the next level.

2. It is said that GIP does not have the experience and expertise to manage a network of airports — what do you bring to the table? How will MAHB and Malaysia benefit from GIP’s presence?

GIP brings decades of experience managing and operating airports through our investments in the Sydney Airport, London Gatwick Airport, Edinburgh Airport, Signature Aviation and previously London City Airport.

All our airports have benefited from increased investment, improved service levels, reduced queue times for passengers, high-quality commercial outlets and strong passenger growth, and we are confident of achieving the same at MAHB. Airports are major enablers of economic activity, tourism and inward investment, and we are confident that an improved MAHB will drive growth in Malaysia to the benefit of both its economy and citizens.

To directly address the point regarding our experience operating a network of aviation assets, GIP acquired a stake in Signature Aviation in 2021, which owns and operates over 200 private aviation facilities in 27 countries, making it the largest fixed base operator network in the world.

3. Why is there a need for GIP to have a shareholding in MAHB? Why can’t it be involved through a management contract?

GIP is an equity investor, and we want to be fully aligned with our Malaysian partners in taking long-term investment decisions. We firmly believe that equity ownership is the best way to drive improvement in a business, as it best incentivises and aligns shareholders to contribute resource and expertise.

By making a substantial investment in MAHB, we and our partners are strongly incentivised to ensure that it achieves the ambitions we have for it.

In addition, although we will only be a minority shareholder, we expect to play the role of a technical partner in the GDA, and bring MAHB as much operational support and assistance as it needs.

4. Some have criticised GIP’s management of the London Gatwick Airport and Edinburgh Airport, saying that these airports and their Skytrax rankings are no better than Kuala Lumpur International Airport (KLIA) — how do you respond to this criticism? How will you make a difference at MAHB’s airports?

We are very proud of the improvements that we have made at all our airports. The passenger experience and operational performance are significantly better at all of them compared to when we made our investments. We believe they are some of the most effectively and efficiently run airports in the world.

GIP has a dedicated team of operations staff that seeks to apply best-in-class industrial processes to improve the operating performance of the companies that we invest in. This team consists of approximately 40 professionals who have, on average, 30 years of industry experience.

To address the ratings topic, Skytrax and other online aviation publications and surveys are generally subjective, and it is unclear to us how accurate, comprehensive or consistent the underlying data is. We focus on customer service and operational statistics that are published in agreement with each relevant regulatory authority at our airports.

For example, in the case of the London Gatwick Airport, we publish a monthly performance report containing over 50 key performance indicators covering the service levels agreed with our airlines and the regulator. These metrics show that we process 97% of passengers through security search in less than five minutes, and operate one of the most efficient runways in the world. We also replaced and modernised the inter-terminal shuttle at Gatwick in a matter of months.

At the Edinburgh Airport, we have grown the number of destinations from 141 to 225 over the last 10 years.

At the Sydney Airport, in our first 18 months of ownership, we were able to reduce security wait times by more than 60% to 11 minutes.

We look forward to working with MAHB’s management and staff, our partners, and government stakeholders to further improve in a meaningful way the service standards, reliability and technology at MAHB’s airports.

5. What is the relationship between GIP and the Abu Dhabi Investment Authority (ADIA)?

As it relates to the offer for MAHB, if it is successful, our Malaysian partners will collectively own an effective 70% stake in MAHB, and GIP and the ADIA will collectively own the other 30% through GIP Aurea Pte Ltd.

GIP and the ADIA have a successful and long-standing relationship based on a shared focus on long-term value creation. We have invested together across a number of businesses, including the London Gatwick Airport in 2010 and VTG Rail in 2022.

6. What is the relationship between GIP and BlackRock?

In January, it was announced that GIP is being acquired by BlackRock Inc, with the transaction expected to complete in the third quarter of 2024. BlackRock has not in any way been involved in the transaction relating to MAHB.

BlackRock recognises GIP’s expertise in infrastructure investing and, after the transaction closes, GIP’s existing leadership team will retain full control and responsibility for the strategic direction and operation of GIP and the companies in which we have invested.

7. Beyond the initiatives that you have identified for KLIA, what other potential do you think can be unlocked in Malaysia’s airport network?

Away from KLIA, we are very excited by the opportunities across the main regional airports of Penang, Langkawi, Kuching and Kota Kinabalu, plus the Sabiha Gökçen International Airport in Istanbul. These airports are in wonderful destinations, and are massively underserved currently by international flights. We really want to boost the number of flights and investment at these locations to attract more tourism.

We need to ensure the passenger experience is more consistent across the network. This means upgrading and harmonising operational service standards, improving retail areas, and investing in automated technology to make passengers’ journeys quicker and less stressful.

8. What is your exit timeline for the investment in MAHB?

GIP is a long-term investor, and we have typically invested in our airports for over 10 years. We need to make long-term investment decisions with our partners to ensure that MAHB’s airports have sufficient capacity for decades to come. It is more important to us that we realise the potential across the airport network, rather than be driven by a predetermined exit date.

If we are successful with our transformation, we would very much consider relisting MAHB on the Malaysian stock exchange in the future.

9. Airports are nationally significant assets that are typically run by the government and local companies. Is your involvement in MAHB abnormal?

Not at all. In many countries, including several in Europe, Latin America, Australasia, India, Brazil, the Philippines and Türkiye, airports are commonly owned and operated by private companies and welcome investment from around the world.

Airports require huge amounts of capital investment to be maintained and expanded. Few governments around the world presently have the funds to do this, so many are entering into partnerships with private-sector specialists.

Of course, governments in these jurisdictions continue to play an important role in the aviation sector through safety and competition policy, and economic regulation.

10. Can you share some of the other infrastructure projects/assets that GIP has invested in? Do you plan to expand your presence in Malaysia beyond MAHB?

GIP has invested in and operated nationally significant infrastructure assets for over 18 years, and we now manage US$112 billion in assets. We are currently invested in 41 companies, which employ over 115,000 people.

We are a global firm with strong presence in 13 Asian countries. Our investment in Vena Energy, the largest pan-Asian renewable energy platform, has operations in Singapore, Thailand, Indonesia, the Philippines, Japan, Taiwan, South Korea and India, and is responsible for powering more than eight million households.

GIP is consistently in the process of identifying and pursuing investment opportunities across the world. Malaysia is a highly aspirational country that offers many interesting investment prospects, and we continue to identify and assess potential opportunities in Malaysia, as well as in other similarly positioned countries, where we think an investment by us can make a difference to the business acquired and its economic contribution.

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