By Ts Dr. Hj Ramli Amir, former President of the Chartered Institute of Logistics and Transport (CILT) Malaysia and Vice-President of CILT International for Southeast Asia
KOTA KINABALU; The Federal Cabinet has agreed to carry out a RM442.3 million upgrade of the Kota Kinabalu International Airport (KKIA), the transport ministry has announced. The ministry said the Cabinet approved the project on Nov 8. It will take two years to complete, with pre-construction to begin this year.
The project will be fully borne by Malaysian Airports Holdings Bhd (MAHB) without involving any government guarantee.
Malaysia Airports Holdings Berhad (MAHB) is adopting a self-funded investment model to expand Kota Kinabalu International Airport (KKIA), aiming to increase capacity and diversify revenue streams through enhanced retail and commercial offerings. This approach, which allows airports to pursue strategic investments with greater autonomy, mirrors successful light-handed regulatory frameworks implemented in countries like Singapore, Australia, New Zealand, and Canada.
This approach aligns with the trend seen in Changi Airport, where user fees are being leveraged to finance improvements. While Changi is increasing passenger fees, MAHB’s model for KKIA will likely involve a different approach to recover investment costs.
Transport Minister Anthony Loke mentioned that MAHB will have a model to recover their investment.
A light-handed regulatory framework is a regulatory approach that imposes minimal oversight and intervention, allowing organisations (like airports) to operate with significant autonomy.
This model relies on setting basic rules or guidelines that encourage market-driven competition and efficiency, while avoiding extensive controls or price setting by regulators. In practice, light-handed regulation focuses on transparency, accountability, and incentives, often leaving room for businesses to negotiate terms directly with customers or stakeholders within competitive boundaries.
In the context of airport management, for instance, this framework allows airports to set their own fees, negotiate directly with airlines, and make investment decisions with limited regulatory interference. The primary role of the regulator in such a framework is to ensure fair competition, monitor market outcomes, and step in only if there are signs of anti-competitive behaviour or market failure.
Countries like Australia and New Zealand have successfully applied light-handed regulation to major airports, allowing them to negotiate with airlines and other stakeholders while maintaining high service standards and driving infrastructure investments.
KKIA Expansion Details
The proposed upgrade for Kota Kinabalu International Airport (KKIA) includes expanding the current terminal building, constructing a multi-storey car park, adding retail spaces, and increasing airplane parking bays. This expansion aims to boost KKIA’s annual passenger capacity from 9 million to 12 million. Transport Minister Anthony Loke envisions integrating a shopping mall with the terminal building, similar to Terminal 2 in Kuala Lumpur, to enhance commercial offerings. The project, estimated to cost a few hundred million ringgit, is expected to begin construction as early as next year, pending Cabinet approval. As Malaysia’s second busiest international airport, KKIA’s expansion is seen as crucial for accommodating increased tourist movement and stimulating local economic growth and job creation.
MAHB’s Funding Strategy
The expansion project will be entirely self-funded by Malaysia Airports Holdings Berhad (MAHB) without government allocations, utilizing an investment recovery model. This approach aligns with MAHB’s recently signed operating agreements, which extend its concession to manage 39 Malaysian airports until 2069. The extended timeframe provides MAHB with a 45-year runway to develop and grow its business, allowing for long-term strategic investments and partnerships. This funding strategy reflects a shift towards a more commercially oriented model for airport development, giving MAHB greater flexibility in pursuing capital expenditure projects while reducing the financial burden on taxpayers
Revenue Generation Methods
The expansion plan aims to diversify KKIA’s revenue streams through both aeronautical and non-aeronautical sources. Increased passenger capacity will likely boost aeronautical revenues from landing fees and passenger service charges. Non-aeronautical income will be enhanced through additional retail spaces and a potential integrated shopping mall.
A new multi-storey car park generating parking fees. More aircraft parking bays increasing landing and parking revenues. Improved operational efficiency potentially reducing costs per passenger This balanced approach aligns with global trends in airport economics, where non-aeronautical revenues play an increasingly important role in financial sustainability. The extended concession period until 2069 provides MAHB ample time to recover investments and optimize returns from these diverse revenue streams.
Passenger Experience Enhancements
The KKIA expansion plan includes several initiatives to enhance the passenger experience by modernising key touchpoints, such as improving air quality, temperature control, and the PA system, along with refurbishing prayer rooms and washroom facilities. Seating arrangements will be optimised, with a wider variety of food and beverage options available to passengers. For added comfort, trolley and buggy services will be improved, and digital solutions like EZPaz and EZBagz will streamline processes, making navigation through the airport more convenient. Additionally, a complimentary Free Trolley Crew service will be available in Terminal 1’s departure and baggage reclaim areas to assist passengers. These enhancements are part of MAHB’s TIME26++ initiative, which aims to increase passenger dwell time and spending in the airport. The focus on improving amenities and services aligns with global trends in airport development, where passenger satisfaction is increasingly seen as a key driver of both aeronautical and non-aeronautical revenues.
Regional Connectivity and Integration
The expansion of Kota Kinabalu International Airport (KKIA) is set to enhance regional connectivity and integration, positioning Sabah as a key hub in Southeast Asia. This development aligns with broader trends in the region with KKIA’s upgraded capacity will strengthen its role as a gateway to Borneo, facilitating increased tourism and business travel to Sabah and neighbouring regions. The expansion supports the growing trend of intra-ASEAN travel, with ASEAN accounting for approximately 50% of international traffic at major Malaysian airports. Enhanced facilities and increased capacity at KKIA will help attract more airlines and routes, potentially establishing new connections to emerging markets in the Asia-Pacific region.
Smart Passenger Flow Solutions
Smart passenger flow solutions are revolutionizing airport operations by leveraging advanced technologies to optimize passenger movements and enhance the overall travel experience. These systems typically employ a combination of sensors, cameras, and data analytics to monitor and manage passenger traffic in real-time.
Key features include real-time monitoring of waiting times at security checkpoints, check-in counters, and other critical areas. Forecasting passenger volumes and potential bottlenecks to enable proactive resource allocation. Heat mapping identifies high-traffic areas and optimizing retail placement for increased revenue and Personalized notifications providing passengers with real-time updates on gate changes, boarding times, and nearby amenities. These solutions not only improve operational efficiency but also contribute to enhanced passenger satisfaction by reducing wait times and providing a smoother airport experience.
Enhanced Security Screening Technologies
Kota Kinabalu International Airport’s expansion plan is set to incorporate cutting-edge security screening technologies to enhance passenger safety and streamline the security process. These technologies aim to reduce queue times, minimize physical contact, and improve overall security outcomes while enhancing the passenger experience. The implementation of such advanced screening methods aligns KKIA with global airport security trends and positions it as a modern, efficient hub in the region.
Innovative Baggage Handling Systems
Innovative baggage handling systems are revolutionizing airport operations, enhancing efficiency and passenger experience. Key advancements include Radio-Frequency Identification (RFID) technology: Enables real-time tracking and reduces the risk of lost luggage. Delta Airlines implemented RFID across its global network, resulting in a 25% reduction in mishandled baggage. Automated Guided Vehicles (AGVs): Self-driving vehicles transport luggage between terminals and aircraft, improving efficiency and reducing manual labour.
A Strategic Gateway to Growth and Regional Connectivity
The expansion of Kota Kinabalu International Airport (KKIA) positions Sabah as a key gateway to Nusantara, Indonesia’s new capital in Kalimantan, strengthening economic, tourism, and trade ties within Borneo and the wider ASEAN region. With increased capacity and improved infrastructure, KKIA can facilitate direct travel routes and stimulate bi-directional trade, enhancing Sabah’s role in regional supply chains.
As Nusantara attracts investment and visitors, KKIA’s proximity and upgraded facilities could make Kota Kinabalu a natural stopover and hub for logistics and tourism, boosting local economic growth. This development opens avenues for collaborative infrastructure projects, such as joint port and transport links, creating synergies that promote sustainable practices and environmental stewardship.
Together, KKIA and Nusantara’s growth will not only bolster connectivity but also reshape Borneo’s strategic relevance, encouraging investment, tourism, and sustainable development across the region.
In conclusion, the KKIA expansion plan adopts a private funding model similar in principle to Changi’s approach but tailored to the Malaysian context. It aims to enhance airport capacity and services without direct government funding, likely relying on a combination of aeronautical and non-aeronautical revenue streams to recover the investment. This approach reflects a growing trend in airport financing, where operators take on the financial responsibility for expansions, potentially leading to more efficient and commercially oriented airport development.
Some observers found the airport’s design unique incorporates local cultural elements. For example, the Departure Hall column head design is inspired by the ‘Wakid’ basket, a symbol of preparing for a meaningful journey in Sabahan tradition. Some floor tiles also feature ethnic patterns of the Rungus and Bajau ethnic groups.
A glaring feature is that as an International Airport it is very close to the city centre being just about 8km away. This proximity to the city is relatively uncommon for major international airports, but it’s not unique. Other examples of international airports that are similarly close to their city centers are Lisbon Airport (LIS) in Portugal is about 7 km from the city centre, Nice Côte d’Azur Airport (NCE) in France is approximately 7.4 km from the city centre, Mexico City International Airport (MEX) is only about 5.3 km from the city centre, Heraklion International Airport (HER) in Greece is just 2.9 km from the city centre while Jeju International Airport (CJU) in South Korea is the closest, at only 2.5 km from the city centre.
