Published February 25, 2009

Rail link to KLIA propped up financially, Parliament told

Part of fee levied on air travellers goes to operator, a YTL unit

By S JAYASANKARAN
IN KUALA LUMPUR

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THE fast rail link between Kuala Lumpur International Airport (KLIA) and the city centre has been propped up financially since day one, Malaysia's Parliament was told yesterday.

Transport Minister Ong Tee Keat said Express Rail Link (ERL), which operates the 57 km link, has always received compensation from KLIA's state-owned manager Malaysian Airport Holdings (MAH) to make up for poor sales.

The high-speed rail line was built in early 2002 for RM2.8 billion (S$1.2 billion) by YTL Corporation. And although YTL talked about spinning it off as a listed entity, few analysts felt it did not receive compensation in some form or other.

YTL's flamboyant owner Francis Yeoh has never talked about the line's profitability, although he has pointed out that on a cost per km basis it is one of the country's cheapest lines. Its trains cover the distance in 28 minutes.

Mr Ong told Parliament that under a concession agreement for the rail service, MAH has to pay ERL a portion of the service charges it levies on all KLIA passengers. He did not specify the quantum, but analysts believe it to be about 10 per cent.

Since April 1 last year, the Finance Ministry has been reimbursing MAH the money it paid ERL, Mr Ong said, implying that the government is indirectly subsidising the rail service.

He said ERL receives no allocation from airport taxes but that under the concession agreement, an allocation from passenger service charges levied by MAH has been due to ERL since 2002. 'For example, if RM51 is collected from an international flight, RM5 is allocated to ERL,' he said.

He added that the allocation was agreed based on projected traffic before ERL started operating.

'With the inception of the low-cost carrier terminal two years ago, its takings have further deteriorated,' he said.