This article first appeared in The Edge Malaysia Weekly on February 24, 2025 - March 2, 2025

SIEMENS Logistics T7 (SLT7) Consortium, consisting of Siemens Logistics Pte Ltd and T7 Global Bhd (KL:T7GLOBAL), is seeking more time from airport operator Malaysia Airports Holdings Bhd (MAHB) (KL:AIRPORT) to finish the upgrade of the baggage handling system (BHS) at Terminal 1 of Kuala Lumpur International Airport (KLIA T1), which would result in a one- to 1½-year delay, according to sources.

The three-year project, which was awarded in October 2022, was originally slated to finish in December 2025.

In a reply to The Edge confirming the delay, SLT7 Consortium cites challenges of working within a “live” airport environment. It was unable, however, to give the new projected completion date of the entire project.

“The involved parties are fully committed to delivering the project in the shortest time possible, ensuring BHS availability at all times at KLIA T1,” says the consortium. “Discussions on resequencing the modernisation works are still ongoing.”

It explains that upgrade works on the project are taking the consortium longer than planned because they are “being executed during daily operations, with passengers travelling to and from KLIA T1”.

“This poses a challenging environment for all involved parties. Owing to operational requirements and an increase in the number of passengers, resulting in more bags to be processed by the BHS, the parties aim to agree on the resequencing of works. This will ensure BHS availability at all times at KLIA T1, and enable the parties to serve the increased high traffic of passengers at KLIA T1.”

KLIA handled 57.1 million passengers in 2024, a 20.9% year-on-year increase, an MAHB filing with Bursa Malaysia shows. The figure was 91.6% of pre-pandemic levels in 2019 of 62.3 million passengers.

Outlining the progress so far, SLT7 Consortium says the first of three phases has been completed.

“The parties have successfully completed Phase 1, which will enable roughly 25% additional baggage handling capacity for KLIA T1. Currently, the parties are executing works under Phases 2 and 3,” the consortium adds.

Asked whether the extension will raise the total project cost, SLT7 Consortium says: “BHS availability and no disruptions to the passengers are the priority of the project, and these aspects will not be compromised during the discussions on resequencing the modernisation works.”

Still, critics point out that the consortium was aware that the project would be executed while the airport was in operation. Indeed, the consortium’s agreement with MAHB states: “The project management team will deliver the project in live airport environment without intervening [in] the daily airport operations.” This is T7 Global’s maiden project in the airport logistics industry.

The delay to the BHS upgrade project is a blow to MAHB’s goal of restoring KLIA’s ranking among the world’s top 10 airports. The latest setback comes after it was disclosed that the aerotrain system at KLIA — suspended since March 2023 — will now be operational only by the second quarter of this year, even though MAHB had previously stated that the project would be completed by Jan 31. Minister of Transport Anthony Loke has expressed his disappointment over the slow progress in the implementation of the aerotrain replacement project.

Talk of replacing the BHS began as early as 2019 as part of the KLIA asset replacement programme for ageing assets. Documents seen by The Edge show six original equipment manufacturers were invited to submit a bid for the proposed project in November 2020, with the tender closing in July 2021.

The scope of works includes doubling the capacity to cater for 49.5 million passengers per year from 25 million passengers per year currently. The new BHS is also expected to be reduced in total length by 30% to 40% from the current 42km, which would result in a reduction of maintenance costs.

The BHS at KLIA T1 will be completely replaced with the highest possible standards comparable to an installation in a high-­quality international airport, according to the documents.

T7 Global’s filing with Bursa in December 2022 shows that SLT7 Consortium was awarded the contract to modernise the BHS in October 2022, with work commencing on Jan 19, 2023, and expected to be completed on Dec 18, 2025. The value of the contract was not disclosed, but former MAHB managing director Datuk Seri Iskandar Mizal Mahmood was quoted as saying in March 2023 that MAHB had budgeted up to RM1.1 billion for the new BHS.

Under the deal, T7 Global’s subsidiary T7 Kemuncak Sdn Bhd is responsible for the installation and commissioning of a new baggage system, steel support construction, refurbishment of supervisory control and data acquisition (Scada) control rooms, server rooms and X-ray screening rooms and IT infrastructure, while Siemens Logistics will supply the VarioTray to boost baggage throughput, the VarioBelt belt conveyor, the VarioStore early bag store that improves the processing of transfer baggage and allows passengers to check in early, and high-­performance controlling software.

T7 Global said the award would contribute positively to the group’s earnings and net assets for the financial years 2023 to 2025 (financial year-end on Dec 31). The group reported that net profit for the cumulative nine months ended Sept 30, 2024 (9MFY2024) rose 42.5% to RM26.65 million from RM18.7 million a year ago, on the back of a 36.8% year-on-year increase in revenue to RM458.94 million from RM335.43 million.

T7 Global’s share price has slipped 3.06% year to date to close at 47.5 sen last Thursday, giving the company a market capitalisation of RM416 million.

MAHB is being taken private by the Gateway Development Alliance (GDA) consortium, comprising sovereign wealth fund Khazanah Nasional Bhd, the Employees Provident Fund, the Abu Dhabi Investment Authority and BlackRock’s Global Infrastructure Partners. It is understood that accelerating the aerotrain replacement project and the BHS upgrade will be GDA’s immediate focus once the takeover is completed in March. 

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