1.

0 Introduction
In cognition of the cost benefit analysis, the KLIA2 project appears to be significant to our
requirement study. The facility is being built by the country's airport operator, alaysia
Airports !oldings "hd #A!"$, a public listed company controlled by state in%estment
manager Kha&anah 'asional, together (ith )*+,"I'A -).I /oint 0enture, that is the
turn1ey contractor for the terminal project. The KLIA2 terminal (as initially due to open in
2eptember 2344 but has been repeatedly delayed, plus the price tag has doubled up to not
more than .5.6 billion, (hereby the go%ernment asset funded by A!", is of .3.75
billion. 8espites of all the contro%ersy and issues rise against KLIA2, the public may
e9perience alaysia first hybrid airport, (ith upgraded business class ser%ices and
international passenger segregation on ay 6
th
, 234:.
The necessities that are about to be discuss in this assignment includes assessing monetary
social costs, the benefits and impacts of KLIA2 in%estment project gi%en the many misses
and delays. In that case, people need to 1no( the truth as to (hat is really going on (ith
KLIA2 project and according to the cost benefit analysis that (ill be e9plain in the
continuous chapter.
2.0 Project Background
To begin (ith, the ain Terminal "uilding ; 2atellite "uilding -ac1age (as actually
tendered as a Lo( +ost +arrier Terminal "uildings #L++T$ (hereby the 8ate of
+ommencement (as4< August 2343 and 8ate for +ompletion (as 2eptember 2344. KLIA2
originally projected to cost about .2 billion as initially, the project planned to ma1e the
terminal a simple, hassle free and ultimately %ery lo( cost terminal to operate from.
Air Asia, as being KLIA2 biggest and most important future tenant, had contributed in many
reasons for modifications, substitutions and changes into a greater functional terminal
including a longer run(ay and greater floor space for higher comfort le%els in (hich had
certainly increased the construction cost. The ne( terminal (ill ha%e the capacity of handling
up to :7 million passengers per annum compared to 22 million passengers for the past years.
A!"=s managing director> Tan 2ri "ashir Ahmad, had disclosed the presented substantial
that the ne( terminal (as delayed three times from its original completion date of 2eptember
2344 because of ne( requirements. The first delay to April 2342 (as due to the design
competition and open tenders, and the second delay to ?ctober 2342 (as due to the e9tra
commercial space added and the e9tension of the third run(ay. oreo%er, the third delay to
April 2345 (as due to the recent request of Air Asia to fully automate the "aggage !andling
2ystem #"!2$ to (hich A!" has acceded.
8espite of all the issues mentioned earlier, the contractors ha%e also blamed poor soil
conditions as the land that consist mainly former oil palm plantations for the delay because
they need to modify and re,design the structural (or1s. After A!" had solid and certified
confirmations to(ards the problems of the se(erage pipes due to ground conditions, it (as
no longer considered as an issue but could require years of subsequent maintenance.
2.1 The Cost of KLIA 2
"elo( sho(n in the Table 4 are the briefly e9plained the changing upgrading cost for
KLIA2@
Table 1: The Changing Costs for KLIA2
Date Eent
/ul 233A
KLIA2 (ould cost .4.A billion. This (as announced by then,Transport
inister ?ng Tee Keat.
ar 2336 KLIA2 budget increased to .2.3 billion
?ct 2343 KLIA2 cost ballooned to .2.7 billion.
'o% 2344 KLIA2 cost more than doubled compared to 233A at .5.6 billion according
Date Eent
to alaysia Airports !oldings "hd #A!"$.
/ul 2342
AirAsia Broup +*? Tony Cernandes said KLIA2 cost had escalated to .7
billion. "ut authorities denied the figure.
?ct 2342
KLIA2 cost had increased to .: billion, Transport inister Abdul .ahim
"a1ri told the parliament.
Aug 2345
Acting Transport inister !ishamuddin !ussein said KLIA2 (ould not cost
more than .: billion.
Ceb 6,
234:
8eputy Transport inister Abdul A&i& Karpa(i, the chief of 2pecial +abinet
Tas1force on KLIA2 confirmed !ishamuddin=s statement that the cost (ould
not e9ceed .: billion.
ar 54,
234:
Abdul A&i& admitted to The *dge Cinancial 8aily that the cost of KLIA2
airport is more than .: billion.
After all, as sho(n in the table abo%e, as on Ceb 234:, the total cost for KLIA2 has
not e9ceed the budget of .: billion, including the go%ernment asset funded by
A!", is of .3.75 billion including an upgraded airport traffic control to(er and
471m of road infrastructure.
2.2 The Chrono!og" of KLIA 2 eents
The chronology of the e%ents that occurred upon the KLIA2 completion is sho(n in
the table belo(@
Table 2: The Chronology of KLIA2 Events
Date Eent
233D KLIA2 master plan (as finali&ed.
2336 2ime 8arby and AirAsia proceed (ith proposed L++T project in Labu.
-roject later canceled.
2336 Cirst request from AirAsia to separate run(ay to 2.71m.
2343 *arth(or1s at KLIA2 begin and contractors appointed.
/un 2344 AirAsia requested to change semi,automated baggage handling system
#"!2$ to a fully automated "!2. At this juncture, :3E of the project had
been completed as per ?ctober 2342 deadline and changes (ould cause
delay to the project.
2ep 2344 A!" starts project management at KLIA2.
2ept 2344 Cirst completion date.
'o% 2344 KLIA2 plan upgraded to cater to :7 million passengers. +ost up to .:
billion.
Apr 2342 2econd completion date.
Apr 2342 )* request one year to ma1e the necessary changes.
?ct 2342 AirAsia says (ill shift to KLIA2 once completed.
?ct 2342 Third completion date.
'o% 2342 )* and "ina -uri !oldings raised cash flo( issue. A!" paid .463
million for <7E of (or1 done and ad%anced .D3 million to e9pedite
completion of KLIA.
/an 2345 - announces ne( date for KLIA2 opening /une 2D.
/an 2345 )* as1 si9 more (ee1s to complete the project and commit deli%ery on
ay 4.
Apr 2345 Immigration department request additional counters from 57 to D3.
4 ay
2345
Courth completion date.
Date Eent
2D /un
2345
Cifth completion date.
2 ay
234:
2i9th completion date.
Crom the table, (e can %isibly comprehend the completion of KLIA2 from the
start. After the si9th completion date, (e can e9perience the first hybrid terminal
in alaysia as it had officially opened to public since 6
th
ay 234:.
#.0 Cost Benefit Ana!"sis
+ost benefit analysis #+"A$ is a (ay of measuring costs and benefits of this project in order
to allo( one to estimate the net gain to society and indi%idual society members. "elo(
sho(n the major upgrades in specifications for KLIA2>
Table 3: Major Upgraes in !pe"ifi"ations for KLIA2
2o, from abo%e table, the failures of the components that lead to the increase in cost (ere@
Larger terminal building@ .:23 million #473,333 sq m to 27A,333 sq m$
ore aircraft stands @ .4<3 million #73 semi contact stands to <D gates and D
remote stands$
Larger run(ay@ .4D3 million #2.71m long, :7m (idth to 5.6< 1m long, <3m (idth$
Increased earth(or1s@ .<A3 million #:.D7 million sq m to 44.46 million sq m$
Aerobridges@ .423 million #D3 aerobridges$
)pgraded air traffic control to(er@ .453 million #AAm height to 65m height$
)pgraded public infrastructure@ .2<3 million #D1m (ith 4.71m ele%ated to 471m
(ith 7.: 1m ele%ated road.
$.0 The Benefits
)pon completion of KLIA2, (e can highlights some of the ad%antages by comparing KLIA2
(ith the old Kuala Lumpur International Airport #KLIA$ and also the Lo( +ost +arrier
Terminal #L++T$, in (hich (ill be sho(n in the table belo(@
Table #: Co$parisons bet%een KLIA& LCCT an KLIA2
ITEMS KLIA LCCT KLIA2
+apacity
#passengers per
year$
27 million 47 million :7 million
Terminal si&e :A6,:3: sqm <:,3<A sqm 27A,333 sqm
.etail space 46,:27 sqm D,D6D sqm 52,333 #estimated$
ITEMS KLIA LCCT KLIA2
+ar par1 #lots$
<,23D #co%ered lots$
7,736 #unco%ered lots$
5,333 #unco%ered lots$ <,333
KLIA2 -ar1ing
+ost about .43 "illion
.533 illion
#terminal cost only$
.5.< , :.3 "illion
.un(ay access
.un(ay 4 and 2 at
KLIA
.un(ay 4 and 2 at KLIA
:Km run(ay 5 (ith
a 2.2Km separation
from .un(ay 2
-assenger
comfort
#capacity F floor
space$
72 pa9 per sqm 25: pa9 per sqm 42: pa9 per sqm
?b%iously from Table :, it may not be presumptuous to admit that KLIA2 is designed to be a
retail airport. The large terminal is due to the large space for retail and more re%enue could be
generated from this source. The reason that could contribute to this idea is that (e 1no(
many middle income people from the 2outheast Asia choose to fly (ith Lo( +ost +arrier
and they may assume for much more amenities and comforts once they landed, and that
(ould be e9actly (hat Kuala Lumpur International Airport 2 ha%e to offer to their flyers.
Apart from that, the full house le%el of con%enience (ith aerobridges, (al1alators, public
transport hub (ith a direct train to Kuala Lumpur, an airside transit hotel and a public mall
(ill surely fulfill the le%el of air tra%eller=s satisfaction. In addition of that, KLIA2 itself can
reduce their operating cost from their latest accommodations such as self,chec1,in 1ios1 and
self,chec1,in baggage.
%.0 Conc!usion
Cundamentally, the process of +"A is comparati%e so that (e can possibly ma1e judgments
about (hich projects from a limited choice should be gi%en the go ahead. The airlines
industry=s cycle appear to be closely lin1ed to the (orld economic climate. Ghen gro(th in
the (orld economy slo(s do(n, the gro(th of demand for air traffic and for air freight also
bra1es do(n. 8uring a period (hen a%erage fares (ill continue to decline, control and
reduction of cost in all areas becomes critical and continuous necessity. Ge (ould agree that
the parties in%ol%ed in KLIA2 project should be transparent about the issues they face.
2o, from the cost benefit analysis, (e ha%e come to an understanding that a hybrid terminal
li1e KLIA2 (ill bring more significance %alue to the country starting as touted by alaysia=s
authorities, the (orld=s largest lo( cost airline terminal and (e can predict the huge potential
in retail in (hich (ill contribute to economic gro(th, some policy regulations and also
e9tensi%e employment opportunity for alaysians and the immigrants (ithin the country.