Is the RM20 price hike by KLIA Express justified after an estimated RM89m increase in annual revenue post KLIA2 extension?

Media Statement by Dr. Ong Kian Ming, MP for Serdang, on the 7th of December, 2015

Is the RM20 price hike by KLIA Express justified after an estimated RM89m increase in annual revenue post KLIA2 extension?

I was shocked to read about Deputy Transport Minister, Datuk Abdul Aziz Kaprawi trying to justify the RM20 increase in the price of KLIA express tickets from RM35 to RM55 starting 1st of January, 2016 by saying that it was necessary to cover the losses experienced by the company since the beginning of its operations in 2002. I was equally shocked to learn that KLIA Express stated that it is allowed to increase its fare to RM64 under the concession agreement.

According to statistics given by the Ministry of Transportation (MoT), the ridership on KLIA Express increased by 42% from 2,062,223 passengers in 2013 to 2,928,302 passengers in 2014. The ridership on KLIA Transit increased by 44% from 4,373,220 in 2013 to 6,310,323 in 2014. Total ridership increased by approximately 44% from 6,436,443 in 2013 to 9,238,625 in 2014. This increase in ridership can be attributed to the opening of the rail link from KLIA to KLIA2 on the 6th of May, 2014. (Table 1 below) This 44% increase in ridership from 2013 to 2014 can be translated into an additional estimated revenue of RM64 million for KLIA express.[1]

The ridership for KLIA Express from Q1 to Q3 2015 has increased by 26.3% compared to Q1 to Q3 2014 and by 9.0% for KLIA Transit during this period. If this trend continues in Q4 2015, this means that the additional estimated revenue from 2014 to 2015 comes up to RM25 million.

This means that as a result of the KLIA2 extension, the estimated additional revenue earned by Express Rail Link Sdn Bhd is approximately RM89 million in 2015 compared to the baseline year of 2013.

Given that ERL Sdn Bhd did not have to foot a single sen of the construction cost of the KLIA2 extension and that the additional costs of operations for the KLIA2 extension is marginal, why was ERL allowed to increase its fares by such an exorbitant amount? Wouldn’t the increase in revenue as a result of the increase in ridership be sufficient for ERL to make a reasonable profit and recover its capital expenditure?

It is normal practice for a concession holder to sign a supplementary agreement with the government whenever there is a major change to the original concession agreement. For example, BESRAYA signed a supplementary agreement with the government in 2011 as a result of the BESRAYA Eastern Extension (BEE) to Ampang. The concession holder for the KLIA Express and KLIA Transit, ERL Sdn Bhd, would also have signed a supplementary agreement with the government as a result of the KLIA2 extension. This supplementary agreement would have included details such as the allowable fare increase over time. Was the government negligent in allowing for a huge fare increase for ERL Sdn Bhd in the supplementary agreement knowing that the KLIA2 extension would bring about a significant increase in ridership? Why didn’t the government squeeze the concession holder to limit or even prevent a fare hike given that the KLIA2 extension was fully paid for by the government?

I call upon the government to disclose the concession agreement involving ERL Sdn Bhd so that all Malaysians can evaluate for themselves on whether the fare hike is justified or if the government was negligent is allowing the concessionaire to enjoy exorbitant profits at the expense of ordinary Malaysians.

Dr. Ong Kian Ming
Member of Parliament for Serdang

[1] Assuming a fare of RM35 for passengers on KLIA Express and an average fare of RM17.50 for passengers on KLIA Transit, some of whom use this service to go to Putrajaya and Cyberjaya.