Reassessing the Privatisation of MAHB: A Strategic Asset or an Opportunity for Growth?

As Malaysia Airports Holdings Berhad (MAHB) contemplates partial privatisation, it’s crucial to examine not only the benefits but also the long-term implications. MAHB, one of the world’s largest airport operators, has demonstrated a solid record in enhancing connectivity, service quality, and passenger growth, achievements underscored by its 65 million passengers in the first half of 2024 alone. With major assets and expansions both domestically and internationally, the question arises, Should MAHB continue to leverage its in-house expertise for sustainable growth, or should it consider the proposed sale of 30% to foreign partners like GIP and ADIA?

The Rationale for Privatisation

Privatisation advocates argue that selling a portion of MAHB would accelerate modernisation, drive operational efficiencies, and bring in specialised expertise. GIP’s track record in managing infrastructure projects could indeed complement MAHB’s growth ambitions. Moreover, the new Operating Agreements (OAs) offer investor-friendly terms and extend MAHB’s concession until 2069, providing it with unprecedented flexibility for funding and expansion.

However, this raises a critical question, with improved terms and MAHB’s impressive financial stability, is the sell-off truly necessary? Recent figures suggest that MAHB is on a solid growth trajectory, with a 146% surge in earnings to RM395.79 million in 1H24, affirming its resilience and ability to drive value independently.

Evaluating MAHB’s Current Standing

Several favorable developments bolster MAHB’s position:

1. Financial Stability: With a AAA/Stable rating from RAM Ratings, MAHB enjoys financial robustness. Consensus estimates peg its revenue at RM5.78 billion in 2024, with a net profit expected to reach RM750 million, reflecting strong investor confidence.

2. Strategic Expansion: Key projects such as the Penang International Airport upgrade and the Kota Bharu expansion are advancing well, demonstrating MAHB’s commitment to enhancing infrastructure. Furthermore, its Turkish asset, Istanbul Sabiha Gokchen International Airport (ISG), is thriving, with new capacity expansions promising continued growth in one of Europe’s busiest airports.

3. Operational Flexibility: The extended OAs allow MAHB to retain 10% of revenue over operational costs and secure 90% reimbursement if costs exceed earnings. Additionally, the new Airport Development Fund (ADF) will lessen dependency on government subsidies, while infrastructure costs can now be flexibly funded via development expenditure or other models.

Privatisation Risks and Strategic Value of MAHB

Selling a 30% stake to foreign entities, especially in a company with high strategic importance, raises concerns about ownership of key national assets. The newly favorable OAs lessen the need for external capital, and MAHB has already displayed the capacity to self-fund expansions. Khazanah and the Employees Provident Fund (EPF) would also need to invest around RM5 billion into the deal, a considerable expenditure that might not deliver proportionate long-term benefits.

Considering Malaysia’s strategic assets, maintaining control of MAHB aligns with the broader goals of the Madani economic agenda, which emphasises sustainable value creation and responsible investment for the benefit of future generations. Rather than parting with 30% of a AAA-rated asset, Malaysia should prioritise aligning MAHB’s growth with national interests and the aspirations of the rakyat.

Long-Term Vision and Governance

MAHB has set ambitious targets, and its “Management Integrity Message” speaks to its commitment to transparency and high ethical standards. A focus on integrity not only strengthens MAHB’s market position but also builds public trust. MAVCOM, as an oversight body, should uphold governance principles to ensure that any changes prioritise consumer needs and industry resilience.

This potential privatisation, though framed as a commercial transaction, has broader ramifications given Khazanah’s role as a state-owned entity. The World Bank’s Private Sector Investment Lab, aimed at boosting private investment, includes key players like BlackRock and Temasek. While bringing in global investors might promise financial support and risk mitigation, it’s worth questioning whether these benefits outweigh the value of retaining full control over an asset that could be pivotal for Malaysia’s economic future.

A Call for Reflection

Privatising MAHB at this juncture may offer short-term financial injections, but the potential trade-offs in strategic control and long-term value creation call for careful consideration. With MAHB already meeting or exceeding its growth objectives and new agreements enhancing its investment appeal, the timing may not be ideal. Instead, a balanced approach, one that prioritises sustainable growth, national interests, and alignment with the aspirations of the rakyat, might be a wiser course.

Ultimately, we should aim to support MAHB in its trajectory towards becoming a globally recognised airport operator that remains under Malaysia’s strategic control, safeguarding its value and contribution to the nation’s prosperity for generations to come.