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Malaysia Airports signs deals for KLIA Aeropolis

Malaysia Airports Managing Director Badlisham Ghazali, third from right, explaining the layout of KLIA Aeropolis to the other attendees of the launch.

KUALA LUMPUR - Malaysia Airports Holdings, the world's second largest airport group by the number of handled passengers,announced on Monday five partnerships and agreements to develop KLIA Aeropolis.

The company said at the launch of KLIA Aeropolis that it was aiming to turn an area of roughly 100 sq. km around Kuala Lumpur International Airport into an airport city which was expected to contribute 30 billion ringgit ($7.34 billion) to the nation's gross domestic product over a 15-year period, excluding airport terminal operations.

KLIA Aeropolis will be developed around these three areas: air cargo and logistics; aerospace and aviation; and facilities for events and conferences and also leisure.

Malaysia Airports has signed deals with conglomerate DRB Hicom andlow-cost airline AirAsia.Thecompanies involved in the deals are in the air cargo and logistics sector, and in the aviation and aerospace sector.

DRB Hicom's subsidiary, the aviation ground service provider KL Airport Services is allocated an extra 41,806 sq. m for its cargo operations at the site of the former low-cost carrier terminal which will now be converted into a cargo terminal.

AirAsia will be given space to build its regional distribution center within the cargo terminal for its low-cost courier and parcel delivery service, Redbox.

As part of the development of the airport city, Raya Airways, a cargo and ground handler, is teaming up with logistics company DHL Express and global air service supplier United Arab Emirates-based Dnata for its operations. It was a wholly owned subsidiary of the Transmile Group but was sold off and restructured before emerging as Raya Airways.

Raya Airways is planning a 100 million ringgit refurbishment to transform the old low-cost air terminal into a cargo facility to be completed in 2018, according to local paper The Edge Financial Daily.

Other partnerships were with Dutch airport logistics provider Vanderlande Industries to set up a regional distribution center and Swiss support company RUAG Aviation Malaysia to convert a part of Subang airport into a maintenance, repair and operations facility.

Malaysia Airports did not disclose the value of these deals.

"While KLIA's past cargo growth rates had been in the low single digits, we had recorded high growth in specific cargo segments, namely 33% in express cargo and 102% in mail cargo volume since 2010," Malaysia Airports Managing Director Badlisham Ghazali said.

The focus on integrating  freight and logistics infrastructure is premised on Malaysia Airports' expectations that the global and local cargo traffic will grow on the back of an e-commerce boom.

Badlisham said the e-commerce market in Southeast Asia is expected to expand fivefold to $35 billion by 2018 with intra-Asia air freight growing at 6.5% annually until 2033. That would make it the fastest growing air freight trade lane globally.

The company is expecting growth in the air cargo and logistics sector to double in the next 10 years. It is currently handling about 726,000 tons annually.

Malaysia Airports operates 40 airports including one in Turkey. KLIA Aeropolis is part of its five-year business plan to 2020 to establish KLIA as the preferred regional aviation hub.

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