Kuala Lumpur’s Aviation Hub Status Driven by Low-Cost Travel

Kuala Lumpur’s Aviation Hub Status Driven by Low-Cost Travel
September 12, 2018

Kuala Lumpur International Airport (KLIA) is expected to hit the 60 million annual passengers milestone this year, closing in on Bangkok Suvarnabhumi and Singapore’s Changi, which both hit 60 million just last year.  

All three cities made Euromonitor’s top ten list of most visited cities in the world in 2017, and compete fiercely for both regional and global shares of the aviation and tourism industries.

In fact, the flight route between KLIA and Changi is the world’s busiest air route.

KLIA may not rank as the busiest airport in Southeast Asia yet, but is currently the fastest growing airport in the region, and the only one to record a double-digit year-over-year rate of growth in 2017.


Tourism and infrastructure drives growth

Low-cost airlines have revolutionised travel, bringing an end to the days of exorbitant prices and limited options, creating new demand regionally and globally.

Low-cost travel now constitutes 25 per cent and 50 per cent of total travel in Asia and Malaysia respectively.

This directly contributes to the continued growth in Malaysia’s tourism industry, now the country’s second largest source of income.

Further gains are expected as four out of five of the fastest growing markets in terms of additional passengers per year - China, India, Indonesia and Vietnam – are well-serviced by low-cost routes via Kuala Lumpur and already contribute large numbers of visitors to the country.

The ‘Malaysia Truly Asia’ brand has boosted tourist arrivals and receipts from 10.2 million tourists and US$4.2 billion in revenue in 2000 to 25.9 million arrivals and US$20.2 billion in receipts in 2017. By 2020, Tourism Malaysia expects to welcome 36 million tourists with US$41.2 billion in tourist receipts.

Malaysia Airports Holdings Bhd’s (MAHB) RM360 million investments for the country’s first low-cost carrier terminal, LCCT, later went through another major refurbishment to be reborn as the KLIA2 terminal.

MAHB also supported low-cost travel growth via 12 years of incentive programmes including recovery assistance for airlines during the global financial crisis.

Low-cost travel “will take us to the next level of growth in air travel demand,” MAHB’s acting group chief executive officer, Raja Azmi Raja Nazuddin said in a statement in January. 

Furthermore, MAHB’s CFO has confirmed plans to double KLIA’s capacity from 75 million to 150 million passengers per annum in the next 10 to 20 years, which would put it into the top five globally as measured by annual capacity.


The AirAsia factor

KLIA’s status as the twelfth busiest airport in the world for international passengers owes much to Malaysian aviation’s homegrown success story, AirAsia, Asia’s first, and now largest, low cost carrier.  

Starting operations 16 years ago with only two planes, the group carried 65.7 million passengers last year, and has been named the world’s top low-cost airline for ten years running by leading consumer aviation website, Skytrax.

In the process, AirAsia has become one of the most disruptive forces in commercial aviation history.

Boasting its own dedicated low-cost travel hub in the form of the KLIA2 terminal, AirAsia dominates in Southeast Asia, and is expanding further.  It now has some 90 routes spanning Asia Pacific, from Japan to India and the Middle East and South East Asia.

“In doing so, we helped build Malaysia into a leading low-cost air travel hub and a destination in its own right. Last year, we carried 15.5 million international tourists on our Malaysia routes while also allowing Malaysians to travel abroad for less,” AirAsia founder and group chief executive officer, Tony Fernandes shared with the Star recently.

In the wake of AirAsia’s success, low-cost carriers have emerged all over the Asia Pacific (APAC) region, leading to what is now a highly competitive regional aviation market.

Of the 51 million passenger bookings to and from KLIA in the 12 months up to February 2017, 12.1 million – or 24% - were connecting between flights at the airport.

That’s a higher proportion than at Suvarnabhumi and just a little less than at Changi.

Fernandes credits Malaysia’s strong economy for his group’s success.

“Economy in Malaysia is robust. Helping @AirAsia hit record numbers,” he tweeted in April. Adding that “Tourism (is) the future growth driver for Malaysia.”