Infinitepossibilities - I3investor

AN

NU

AL R

EP

OR

T ’04M

ALA

YS

IA A

IRP

OR

TS

HO

LDIN

GS

BE

RH

AD

(487092-W)

MALAYSIA AIRPORTS HOLDINGS BERHAD (487092-W)

Head office

Sultan Abdul Aziz Shah Airport, 47200 Subang, Selangor Darul Ehsan, Malaysia

A N N U A L R E P O R T

04

InfinitepossibilitiesIT ALL BEGINS HERE

w w w . m a l a y s i a a i r p o r t s . c o m . m y

From friendly service

to tears of joy

From borderless technology

to business opportunities

From the preservation of our environment

to shopping satisfaction

Many possibilities

for infinite demands

MALAYSIA AIRPORTS HOLDINGS BERHAD ’04 ANNUAL REPORT

Fulfilling dreams and achieving new possibilities for our customers once used to be a challenge but not anymore. We at Malaysia Airports are now able tooffer the most comprehensive state-of-the-art facilities and services rivaled by none. Determination, commitment and imagination have given us the drive toforge ahead with optimism. Perseverance and hard work have propelled our progress beyond limitations.

In realising our past success and achievements, the one thing that mattered most was our ability to comprehend and respond to our customer’s unwaveringdemands. We pride ourselves on being able to provide solutions to all expectations and every moment in our airport city is truly an experience, which inmany ways will continue to touch the lives of everyone, everywhere.

COVER RATIONALE

18 54 84 114

40 66 94 186

DISCOVERThe Airport City

2- 3

6

A t A G l a n c e . . . . . . . . . . . . . . . . . . . . . . . 3M i s s i o n S t a t e m e n t . . . . . . . . . . . . . . . . . . . 3A w a r d s I n 2 0 0 4 . . . . . . . . . . . . . . . . . . . . 4

From The BoardsC h a i r m a n ’ s S t a t e m e n t . . . . . . . . . . . . . . . . . 6M a n a g i n g D i r e c t o r ’ s R e v i e w O f O p e r a t i o n s . . . . . 20C a l e n d a r O f S i g n i f i c a n t E v e n t s . . . . . . . . . . . 42S a f e t y & S e c u r i t y : O u r P a r a m o u n t C o n c e r n s . . . . 56O c c u p a t i o n a l S a f e t y A n d H e a l t h

I n M a l a y s i a A i r p o r t s . . . . . . . . . . . . . . . . 58T o w a r d s O r g a n i s a t i o n a l E x c e l l e n c e . . . . . . . . . 61G r e e n G l o b e 2 1 : B l a z i n g A T r a i l . . . . . . . . . . 64O u r C o n t r i b u t i o n s T o T h e N a t i o n . . . . . . . . . . 68

Corporate InformationC o r p o r a t e I n f o r m a t i o n . . . . . . . . . . . . . . . . 70D i r e c t o r s ’ P r o f i l e . . . . . . . . . . . . . . . . . . . 72G r o u p S e n i o r M a n a g e m e n t . . . . . . . . . . . . . . 82M a n a g e m e n t T e a m P r o f i l e . . . . . . . . . . . . . . 86G r o u p C o r p o r a t e S t r u c t u r e . . . . . . . . . . . . . . 90M A H B G r o u p O r g a n i s a t i o n S t r u c t u r e . . . . . . . . 92S t a t e m e n t O n C o r p o r a t e G o v e r n a n c e . . . . . . . . 96R i s k M a n a g e m e n t . . . . . . . . . . . . . . . . . . 104B o a r d A u d i t C o m m i t t e e R e p o r t . . . . . . . . . . . 106T e r m s O f R e f e r e n c e B o a r d A u d i t C o m m i t t e e . . . 108S t a t e m e n t O n I n t e r n a l C o n t r o l . . . . . . . . . . . 111

Financial ReportG r o u p 5 - Y e a r S u m m a r y . . . . . . . . . . . . . . . 1165 - Y e a r F i n a n c i a l H i g h l i g h t s . . . . . . . . . . . . . 117G r o u p S e g m e n t a l A n a l y s i s . . . . . . . . . . . . . 118A i r p o r t s O p e r a t e d B y T h e G r o u p . . . . . . . . . . 119F i n a n c i a l S t a t e m e n t s . . . . . . . . . . . . . . . . 120M a l a y s i a A i r p o r t s S t a t i s t i c s . . . . . . . . . . . . 188S h a r e h o l d i n g s S t a t i s t i c s . . . . . . . . . . . . . . 230L i s t O f P r o p e r t i e s . . . . . . . . . . . . . . . . . . 233G r o u p C o r p o r a t e D i r e c t o r y . . . . . . . . . . . . . 236

ResultsN o t i c e O f A n n u a l G e n e r a l M e e t i n g . . . . . . . . . 238S t a t e m e n t A c c o m p a n y i n g N o t i c e O f

A n n u a l G e n e r a l M e e t i n g . . . . . . . . . . . . . . 240P r o x y F o r m

Inside

TH

● The Pan Pacific Hotel, Kuala Lumpur International Airport,

● Thursday, 26 May 2005● 11.00 am

Annual General Meeting


AT A GLANCE

To provide aviation gateway to Malaysia with a network of airports

that will facilitate development of tourism, and the economy as a

whole, through providing a cost effective aviation infrastructure and

services at the highest international standards, meeting the needs of

all customers.

MISSIONSTATEMENT

• The distance between the Main Terminal Building and the SatelliteBuilding, comprising 1.2km, is linked by aerotrains.

• 85 retail and 24 food and beverage outlets await visitors.• Available from within the terminal is the Airside Transit Hotel with

80 rooms and The Pan Pacific Hotel Kuala Lumpur InternationalAirport with 441 rooms.

• The Total Airport Management System (TAMS) links more than 42 systems, which interfaces and integrates communication network.

KL International Airport (KLIA)• Asia Pacific’s Premier Air Transportation and Cargo Transhipment hub• A greenfield site covering 10,000 hectares.• Environmental conscious and themed “An Airport in the Forest and

Forest in the Airport”.• Total annual capacity of 25 million passengers per annum and

1.2 million tonnes of cargo (1st phase).• 2 full service runways, 106 aircraft stands and 46 gates.• 216 check-in counters and 26 custom counters.

Awards in 2004

BESTAirport

KLIA was 3rd for the Best Airport Worldwide in asurvey by AETRA, a customer satisfactionbenchmarking programme. The service element on“Overall Satisfaction with the Airport-All Passenger”consolidates all 27 service elements to decide onthe best performing airport. Previously, the surveywas known as IATA Global Airport Monitor.

KLIA received the Aerodrome Certification from theDepartment of Civil Aviation (DCA). It is a newmandatory requirement by the International CivilAviation Organisation (ICAO) which requires allinternational airports open for public use to provideuniform safety conditions for all aircraft.

• KLIA was ranked 5th in the Airport of the Year2004 survey organised by Skytrax Research, aBritish based air travel industry research company.

• KLIA received the “Gold Award” for theAdvertising Award by Air Transport World (ATW)magazine. The award was based on theIntegrated for Ease advertising campaign, whichwas created for the marketing of KLIA.

KLIA was the first airport in the Asia Pacific Region and the first Travel and Tourismorganisation in Malaysia to be Green Globe 21 certified, which requires thecommitment to continual identif ication, control and improvement of theenvironmental and social impacts of the airport’s operations.

1

2

31

2 3

4- 5

BESTEmerging

FAVOURITEAsianAirport

BESTRetail BESTAirport Hotel

4

5 6

7

8

9

Malaysia Airports Training Centre, Penang, received theMS ISO 9001:2000 Quality Management System fromSIRIM Berhad for provision of aviation security and firerescue services training.

ERAMAN Malaysia, a wholly-owned subsidiary of MalaysiaAirports is the first airport retailer to achieve InternationalSuperbrands Status by Superbrands International.

ERAMAN received MS ISO 9001:2000 Quality ManagementSystem from SIRIM Berhad under the provision of front lineservices for airport retail operation.

In the 5th ASEAN Energy Award, KLIA was first runner-upfor the ASEAN Energy Efficiency and Conservation(EE&C) Best Practices Competition for Energy EfficientBuildings (New and Existing Buildings).

KLIA received the Creativity and Innovation Award 2004 organised by Malaysia Design &Innovation Centre.

KLIA is third in the Favourite Asian Airport category for the TIME Readers’ Choice Awardssurvey.

KLIA is second in the Best Airport category of the Telegraph Travel Award 2004, the mostsignificant study of the travel tastes and habits of British consumers, based on the annualpoll of selected readers of The Daily Telegraph and The Sunday Telegraph.

Malaysia Airports 2003 Annual Report received the Certificate of Merit in the NationalAnnual Corporate Report Awards 2004 (NACRA).

The Pan Pacific Hotel Kuala Lumpur International Airport been awarded “Best AirportHotel in Asia 2004” by Business Asia Magazine and Bloomberg TV.

4

5

6

7

8

9



It is my pleasure to present this Annual Report and audited Financial

Statements of Malaysia Airports Holdings Berhad at the Group and

Company level for the financial year ended 31 December 2004.

DEARSHAREHOLDERS,

CHAIRMAN’S STATEMENT

Tan Sri Datuk Dr. Aris Othman Chairman

8- 9

We look back on the year under review with

satisfaction and a sense of achievement. In many

respects, the year 2004 was a significant watershed in

the development of MAHB. Record operating and

financial results were posted, bearing testimony to the

resilience of the industry and the immense efforts we

have invested in responding to the challenges of

2003. Passenger movements at airports operated by

the MAHB Group grew by 17.7% in 2004, to 39.4 million

passengers. Cargo traffic also rose during the year,

while MAHB’s retail operations achieved its best

performance ever. All these factors contributed

towards a 14.6% growth in Group revenue, surpassing

the RM1.0 billion mark for the first time.

From this new position of strength, and with the

industry returned to health, the MAHB Group is moving

forward with confidence to chart its own destiny. The

momentum has been established, and as barriers

continue to fall and the global village becomes a

reality, the possibilities open to us to forge ahead in

the new liberalised marketplace are infinite. MAHB

has the prerequisites by way of its experience and

expertise in the business. Following the restructuring

exercise undertaken last year, the platforms are in

place to tap opportunities coming our way. By

knowing our strengths and inherent advantages, we

are mapping out cogent strategies to consolidate the

gains we have made the past year.

The challenge for MAHB in the coming years is to

transform these possibilities into realities. But as our

achievements of the past year amply demonstrate,

given the will, commitment and hard work, we can

rise to the challenge and succeed. MAHB stands

poised for a new phase of growth. It will definitely be

an exciting journey, and barring any unforeseen

events, it may also well be a rewarding one. I invite

you to join us on this journey as we strive to bring

MAHB to new heights of achievement.

Financial Per formance MAHB’s f inancial

per formance for the financial year ended

31 December 2004 set a new record when Group

consolidated revenue breached the RM1.0 billion

level for the first time. For the year, MAHB posted a

consolidated revenue of RM1,024.7 mil l ion, an

increase of 14.6% from RM894.0 million recorded

in the previous corresponding period. The Group

achieved a consolidated profit before tax of RM195.6

million, which represents a 29.0% growth from RM151.6

million achieved previously.

‘ I N F I N I T E P O S S I B I L I T I E S ’

Chairman’s Statement (cont’d.)


MAHB’s commendable performance on the financial front was attributed to an improvement in aviation traffic

during 2004, as well as an increase in other business activities of the Group, notably the retail business segment.

However, aeronautical activities remained by far the largest contributor, accounting for 65% of MAHB’s airport

services revenue.

In line with traffic growth, the Group’s retail subsidiary also had a bumper year. Malaysia Airports (Niaga) Sdn.

Bhd., operating under the brand name of Eraman, posted retail revenue of RM207.5 million, an increase of 28.0%

from RM162.1 million recorded in 2003. Eraman derives revenue from its chain of duty-free and non-duty free

shops as well as food and beverage outlets at international airports operated by MAHB.

10- 11

Corporate Developments On 14 October 2004, Minister of Finance

(Incorporated) transferred its 49.26% equity interest in MAHB to Khazanah Nasional

Berhad (Khazanah), thereby increasing Khazanah’s equity stake in MAHB to 72.74%.

MAHB is currently engaged in negotiations with the Government on a proposed

corporate and financial restructuring of the Group to address several financial issues

affecting the Group. These issues include the financial obligations of the Group to

the Government pursuant to the Concession Agreement in relation to the KLIA.

In the meantime, the Government has agreed that lease rental charges to the

Group under the KLIA Concession Agreement will be temporarily suspended until

a new scheme to be formulated under ongoing negotiations between MAHB and

the Government, is formalised.

In line with the move by the Government to promote a culture of high performance

in Government Linked Corporations (GLCs), MAHB has implemented a Key

Performance Indicators (KPI) programme with four broad objectives:

• Ensure focus on key business priorities

• Attract and retain outstanding professional talent

• Enable performance to be measured objectively

• Motivate employees by linking rewards to performance

The KPI exercise has been rigorously implemented among the upper echelons of

management with the development of individual scorecards involving a total of

17 stakeholders, from the position of General Managers upwards. We are already

seeing the benefits of the KPIs in measuring strategic initiatives and key levers for

the success of the Group.



Operational Highlights One of the highlights of

2004 was undoubtedly the impressive rebounding of

the aviation industry. With an estimated 3.7 billion

movements during the year, traffic recovery was

phenomenal across all regions, and Malaysia was no

exception. Total passenger traffic in MAHB’s system of

airports increased 17.7% to 39.4 million pax, with 21.1

million passengers passing through the KLIA alone. A

total of 46 international airlines operated at KLIA in

2004, an increase from 43 recorded the previous year.

This will be covered in greater detail in the Managing

Director’s Review of Operations.

Strong traffic growth was only a part of the successes

chalked up in 2004. The KLIA continued to be the

recipient of several international awards and

accolades, bearing testimony to a great deal of effort

and hardwork coming to fruition. Significantly, we

have been steadily moving up the global ranking for

customer satisfaction, based on surveys conducted by

the Global Airport Monitor now known as AETRA. In

1999, the KLIA achieved 6th position for overall

satisfaction, but we have since gone up two notches

higher in the AETRA 2004 survey. In our non-

aeronautical operations, Eraman was short-listed by

Raven Fox as one of the top three ‘Best Travel Retailer

Operating in a Single Country’ in the Asia-Pacific

region. For the fourth time, the Pan Pacific Hotel Kuala

Lumpur International Airport was named the Best

Airport Hotel in Asia 2004 by Business Asia and

Bloomberg Television.

Unquestionably, the year’s highlights would include two

important certifications achieved during the year. In

doing so, the KLIA has earned a first in the Asia-Pacific

region. The first is the Aerodrome Certification in line

with the ICAO Annex 14 requirements. We are proud to

say this was achieved within the time frame stipulated

by ICAO and is testimony to our commitment to

provide a safe aerodrome for aircraft operations. The

other is the Green Globe 21 certification, the global

benchmarking, certification and improvement system

for sustainable travel and tourism.

We continued to make incremental gains in key

areas of quality, safety and airport security. A total of

seven operating units and divisions within KLIA have

been accredited to ISO 9001:2000, the internationally

recognised quality system. The four other international

airports were similarly accredited in 2004. Our plan is

to have all the domestic airports ISO-certified, and the

documentation phase has already been completed

for 10 airports. MAHB also commissioned UK-based

consultant group to review the security system at KLIA.

Notwithstanding the favourable report from the

consultant, we decided to strengthen the security

system at KLIA with the appointment of an additional

256 auxiliary police men and women. KLIA recently

achieved 5th place in IATA’s list of the world’s most

secure airports. Safety remained our paramount

concern, and one of the improvement measures

taken during 2004 was our investment in a RM2.0

million aircraft simulator.

12- 13

As custodian of the nation’s network of 39 airports and Short Take-

Off and Landing ports (STOLports) strategically spread throughout

the country, MAHB plays an important role in serving the nation’s

interest. Our network is unmatched both in terms of quality and

distribution anywhere else in the region. Domestically no segment of

the population has been left out from benefiting from our airport

network. Over the years, we continued to improve on the network,

thereby narrowing the urban-rural divide. The year under review saw

the official launch of a new terminal building at Sultan Ismail Petra

Airport, Kelantan; a STOLport at Padang Terbang Redang; and the

opening of the new Limbang Airport in Sarawak for operations.

Other major redevelopment and improvement works are ongoing at

the Penang International Airport, Kuching International Airport, Alor

Star Airport, Terengganu Airport in Kuala Terengganu and also the

Sibu Airport in Sarawak.

In the face of human tragedy, it is gratifying that MAHB was able to

lay a meaningful role in helping alleviate the sufferings of those

coastal communities badly affected by the Asian tsunami disaster.

As the world responded with an outpouring of generosity, four of our

airports were used as transit points for tsunami relief operations. The

Sultan Abdul Aziz Shah Airport at Subang was used by the United

Nations World Food Programme as a forward staging area for relief

supplies en route to Aceh, Sumatra. On our part, we waived landing

and parking charges for these humanitarian flights. Up to 3 February

2005, a total of 270 relief flights have landed at the four airports.

Even as we go into print, relief efforts are still ongoing at the KLIA

and the Subang Airport.

Our own people have responded whole-heartedly to the plight of

the tsunami victims. In the spirit of caring and sharing, a sum of

RM30,000 was collected from staff for the Tsunami Relief Fund

through MAHB’s various in-house clubs and associations.



Transforming Possibilities The solid gains and results achieved in 2004 provide a strong base for moving

forward. In an industry that has still significant potential for growth, at home and abroad, we are faced with

an enviable list of possibilities that we can transform into realities.

The Government has been consistent in its avowed goal to transform KLIA into a regional aviation hub. This

may not seem an impossible dream considering the leaps and bounds KLIA has made in just six years of its

existence. The 21.1 million passengers achieved in 2004 can be considered a critical mass for accelerated

growth. Air travel in Asia Pacific is expected to grow by 8.3% per annum until 2008, and this is expected to

benefit all big airports in the region. Within Malaysia, sustained economic growth and higher per capita

income will continue to serve as catalysts for growth of air transport. We also have a reasonably large

population with a propensity for increased air travel. This has been spurred on by the emergence and rapid

expansion of AirAsia. In assessing its potential as a regional hub, KLIA has many factors in its favour even when

compared with the more established airports. Location-wise, KLIA is as close to the centre of Southeast Asia

as one can get. From here, it is only a short flight to any capital city in the region, and this makes KLIA an

ideal stepping stone to the rest of the region. We also see the KLIA as a gateway to China and India, the

two new economic powerhouses of the 21st Century. Both countries are opening their doors for business and

tourism, unleashing a vast potential of untapped opportunities that we can exploit.

To stay abreast of the competition, the prerequisites are capacity, connectivity, marketing and efficiency. In

order to compete successfully with long established airports in the region, Malaysia needed an airport that will

provide capacity ahead of demand. Thus, in selecting the site for a new airport, Sepang was chosen with

considerable foresight because of its huge land bank reserves. The master planners have planned for the

development of the KLIA in phases, and what we see now is only Phase 1 development. The plan for future

development and ultimate expansion includes five runways and a passenger handling capacity of 100 million

pax per annum beyond the year 2020.

For the immediate future, three major upgrading and expansion programmes are in the pipeline. Upgrading

works in readiness for Airbus 380 (A 380) operations are progressing as scheduled, for planned completion by

the end of 2006. The 555-seat double-decker A 380 is the world’s largest passenger plane. Malaysia Airlines

will commence A 380 operations from 2007. A new terminal dedicated to LCCs with handling capacity of

RM10 million passengers per annum is targeted for completion by the early of 2006. Because of the lead time

required in building major infrastructures, we are already planning for the construction of a new Satellite B

terminal under the Phase 2 development of KLIA. When implemented, these projects will increase the handling

capacity of the KLIA by an additional 10 million passengers per annum to 45 million passenger per annum.

14- 15

In terms of connectivity, we are pleased that our

marketing efforts to attract more airlines to operate at

KLIA have borne some results. Currently we have the

lowest total cost of operations per air transport

movement in the region according to a study done in

2004. This wil l be maintained to enhance our

competit iveness. Air l ines also appreciate our

operational f lexibil ity, good safety record and

premium quality of services provided and despite

competition, we continue to increase the number of

airlines operating into KLIA. With a greater airline mix,

it means that the connectivity level at the KLIA will

improve further. The connectivity factor is important

for the further growth of the KLIA, especially to

destinations such as the United States (US). Currently,

US carriers pick Malaysian passengers from Hong

Kong, Tokyo and Singapore even though there is

enough traffic for them to operate direct services.

In a competitive business such as ours, we recognise

that more needs to be done in the marketing effort.

Bilaterals will need to be expanded in tandem with

multilateral initiatives. Incentives will be given as

appropriate to draw new airlines and risk sharing is

already being practices as appropriate. Ultimately,

airports only serve as gateways. The attraction for

airline passengers, be it tourists or business travellers, is

the country itself. Malaysia is not short on attractions.

Malaysia’s political stability, enviable record of

sustained economic growth and high living standards

make the country a haven for business. As a tourist

destination, we have many selling points that can

cater to the most sophisticated or intrepid of

travellers. MAHB is already working closely with the

relevant agencies to sell Malaysia to the world.

In so far as efficiency is concerned, the many awards

we have secured speak volumes. KLIA has come

closer and at times even overtaken the leaders in the

region in service delivery. We have been investing

efforts to improve our position, and this has been

reflected in various benchmarking surveys such as the

one conducted by AETRA.

Nonetheless, we are not about to rest on our laurels.

The near future will see MAHB embarking on an

Airport Customer Satisfaction and Per formance

Programme that will allow us to benchmark ourselves

against the best in the industry. Through customer

feedback, we will be able to improve our services

and facilities provided. We will not settle for anything

less than to be the best airport in the world.

The rise of LCC as a key player in the airline industry

has considerably boosted Malaysia’s competitive

position. From a two aircraft company, AirAsia is now

the leading LCC in the region. Domestically, AirAsia

has been a boom to domestic air travellers. Since

commencing international operations, its international

numbers have been equally impressive, with new

destinations added at break-neck speed. Over the

last three years, AirAsia had about nine mill ion

passengers using its services, and the figure is

projected to grow. Increasing LCC operations are also



likely to benefit Malaysia at the expense of other more established hubs in the region due to origin-destination

traffic, which is generally the modus operandi of LCCs. Although other regional hubs have set up their own LCC,

its impact is expected to be minimal as AirAsia has a better strategic advantage.

Another possibility that we have been aggressively pursuing is the growing internationalisation of our operations.

KLIA serves as a product that can be sold internationally. Its stature and the many awards it has received have

brought international recognition for the country, drawing attention to MAHB’s capabilities in managing and

operating a world-class facility. Since the construction of KLIA, MAHB has received several requests to become

partners in developing other airports. Progress was made in our efforts to gain a foothold in the Indian continent

when we signed a Memorandum of Understanding on 20 December 2004 with Hyderabad International Airport

Ltd to build, operate and manage the new Hyderabad International Airport in the Indian State of Andhra

Pradesh. The Middle East is another area with great potential and we are exploring investment opportunities in

Libya, Oman and Turkey. We are presently in the process of identifying a suitable partner to establish a joint

venture to undertake the airport planning and management aspects.

As MAHB begins to chart a new phase of development, the possibilities are infinite. But as masters of our own

destiny, we have honed down these possibilities to a finite number where we have a distinct competitive

advantage and the greatest chances of success. MAHB takes a holistic approach in the development and

management of its business, but always with two objectives foremost in mind: to serve the national interest and

to strive towards improving shareholder value over the long haul.

16- 17

Outlook & Prospects The coming financial year is shaping up to be a promising one. Global economic

growth is projected at a steady pace of 4% in 2005. Closer to home, ASEAN economies are expected to grow

by between 5 and 5.9% in the coming year. The prospects for the Malaysian economy remains sound, with GDP

expansion projected at 5 to 6%. The private sector will continue to be the main drivers of growth in the

Malaysian economy, with the Government committed to strengthening the fiscal position.

While it is not expected to reprise the phenomenal figures achieved in 2004, global air traffic will continue to

maintain its growth momentum in 2005. The Airports Council International (ACI) has forecast that global

passenger traffic will grow by 6% the coming year, driven mainly by a 5.1% growth in global tourism. In tandem

with the expansion of world trade projected at 5.8% in 2005, global cargo air traffic is forecast to grow by 5.1%.

MAHB has mapped out various strategies in moving forward. However, we acknowledge that much will also

depend on the outcome of ongoing negotiations with the Government to resolve several financial issues that

have plagued the Group for the past couple of years. In the meantime, it is business as usual. We have our work

cut out for us in the coming year with a number of priority development projects to be implemented during 2005.

On the non-aeronautical side of our operations, we will be pressing ahead with the revamp of the retail business

area at KLIA. MAHB’s commercial operations have huge untapped potential to increase the Group’s future

revenue stream. Presently, only 35% of MAHB’s airport services revenue comes from its commercial activities,

which is low compared with some other airports that derive 60% of its revenue from non-aeronautical sources.

The coming year will see MAHB channelling efforts to unlock the largely untapped potential of its commercial

operations. As part of the development plan for KLIA’s retail activities, passengers can expect bigger outlets and

a wider and better brand selection. Improvements will also be introduced to the main terminal building and

contact pier in stages. Once completed, KLIA will raise the bar for a new airport retail and dining experience.

Within the confines of this report, I can only enumerate some of the improvement programmes that we will be

implementing. All our efforts are geared towards achieving a new level of customer satisfaction and enhancing

the Airport Experience not only at KLIA but the entire MAHB system of airports. In short, you can expect more

from MAHB in the coming year.



Acknowledgements A great deal has been

accomplished in 2004, and I thank both management

and staff for their dedication, professionalism and

hard work. However, the real test of our mettle and

determination to chart our own destiny will begin from

2005. Having proven our capabil it ies in taking

momentous events in our stride, I remain confident

that our people will continue to rise to the occasion.

As always, we remain grateful to our support group,

comprising various Government agencies, notably the

Ministry of Transport, Ministry of Finance, Tourism

Malaysia as well as the Immigration, Customs and

Quarantine as well as Police and Fire Departments. In

a long and productive working relationship with these

agencies, we have developed rapport and

understanding. We also enjoy a good relationship with

our bankers and airlines from all over the world. The

millions of customers we are proud to serve and

naturally, our shareholders, deserve special mention.

The Board and I thank all of you for your support.

Three new members were appointed to the Board

during the year. Puan Eshah binti Meor Suleiman was

appointed as a Non-Independent Non-Executive

Director on 29 January 2004. On 1 March 2004, Encik

Gho Peng Seng was appointed to the Board as an

Alternate Director to Puan Eshah, while Encik Long

See Wool was appointed as an Alternate Director to

Dato’ Zaharaah binti Shaari. On behalf of the Board,

I welcome all the new members and look forward to

benefitting from their fresh insights and experience.

TAN SRI DATUK DR ARIS OTHMAN

Chairman

You can actually run your business at our airport.

if you didn’t already know, that is.

We have every facility to make sure your business soars.

A CITY IS THE PLACE TO SEAL DEALS.IN OURS, THEY TEND TO TAKE FLIGHT

K L I A – T H E A I R P O R T C I T Y

MANAGING DIRECTOR’SREVIEW OF OPERATIONS

20- 21

2004 was a banner year for Malaysia Airports Holdings Berhad (MAHB). It was a

year marked by good operational performance, which was mirrored by the

growth in passenger, aircraft and cargo movements at the airports operated by

the Group.

The commendable results of the past year will serve as a solid foundation

on which the Group can build upon for future growth and profitability.

I am confident about the prospects for the industry we are in. With a view

to the future, we have put in place the appropriate structure, people and

strategies, positioned not only to cope with the changing operating

environment but also to seize opportunities coming its way.

DATO’ SERI BASHIR AHMAD ABDUL MAJID Managing Director

22- 23 MANAGING DIRECTOR’S REVIEW OF OPERATIONS (cont’d.)


In marked contrast to the previous year, 2004 was a very good year for

the aviation industry. Although the outbreak of avian flu caused minor

ripples, its repercussions were not of the severity or scale of the Severe

Acute Respiratory Syndrome (SARS).

Consequently, the global economy was able to record its strongest

growth of 4.8% since 1984. Economic expansion was led by the United

States, reinforced by strong growth in Asian economies and revival of

growth in Japan and Europe. The Malaysian economy has benefited from

the more robust growth in world trade and domestic demand, with real

gross domestic product (GDP) increasing by 7.1% in 2004, the highest

registered since 2000. (Source: Bank Negara Malaysia Annual Report 2004)

Against a more favourable economic backdrop, the global aviation

industry rebounded strongly in 2004. According to the Airports Council

International (ACI), international scheduled passenger traffic increased

10.9% and cargo traffic by 8.9% over 2003 levels. All regions reported

double-digit year-on-year growth with the Middle East and Asia Pacific

regions leading the way, recording 14.8% and 17.9% growth respectively

for passenger traffic. Cargo traffic also saw double-digit growth in all

regions, with Asia Pacific registering a growth of 14.2%.

OPERATINGENVIRONMENT

24- 25

A E R O N A U T I C A L O P E R A T I O N S

OPERATIONALHIGHLIGHTS

MANAGING DIRECTOR’S REVIEW OF OPERATIONS (cont’d.)

passengers, representing a growth of

20.6% from 2003. Passenger traffic

handled in December 2004 was the

highest recorded monthly movements

in MAHB’s airport history. In that month,

KLIA alone handled 2.2 mil l ion

passengers, 311,154 passenger above

the highest recorded in December

2003. Of this figure, 1.3 million were

international passengers, breaking the

previous record set in August 2004.

An interesting development in 2004 is

the growth registered for Kota Kinabalu

and Kuching international airports. Both

airports have now overtaken the

Penang airport in terms of total

passenger movements. With only a few

exceptions, MAHB’s domestic airports

recorded positive growth numbers, due

mainly to increased frequencies, and

introduction of new services and

destinations. The low cost carrier (LCC),

AirAsia Berhad (AirAsia) and Malaysia

Airl ines continued to bring in new

passengers, accelerating the growth

momentum at all airports.

Despite regional competition, airports

operated by the Group continued to

attract new airlines. As at December

2004, a total of 46 air l ines were

operating at KLIA, an increase from

43 recorded in the previous

corresponding period. The new airlines

included Lufthansa German Airline,

Jatayu Airlines, Riau Airlines, Star Air,

Hainan Air (chartered fl ights) and

United Parcel Services (cargo).

Additionally, a total of 22 or 39% of

One of the highlights of 2004 was

undoubtedly the impressive rebounding

of the aviation industry. With an

estimated 3.7 bil l ion passenger

movements during the year, traffic

recovery was phenomenal across all

regions, and Malaysia was no exception.

In 2004, total passenger movements

rose 17.7% to 39.4 million passenger,

compared to 33.5 mil l ion in 2003.

Airports reported an 11.9% growth in

commercial aircraft movements.

Cargo traffic also staged a recovery,

increasing by 10.2% to 957.1 million kg.

All five international airports in Malaysia

recorded a double-digit growth in

passenger movements. Exceeding

earl ier expectations, KLIA alone

handled a total of 21.1 mil l ion



international airlines operating in Malaysia increased their

frequencies during 2004. Our efforts to stimulate origin-

destination (o&d) travel continued to pay off. The year also

saw AirAsia aggressively expand its international

destinations, while another local carrier Berjaya Air, has

increased its flight frequencies to Indonesia.

These statistics underscore the tremendous marketing and

promotional efforts we have initiated to attract international

airline to commence or increase operations into Malaysia.

In this regard, the airline and tourism industries and our own

business of managing and operating airports are

inextricably l inked. Working closely with the tourism

Malaysia, we played our part in helping showcase Malaysia

and the many attractions our beautiful country has offer

through a series of events organised at KLIA and at

international aviation events.

We also continued to increase our marketing efforts.

Through our participation in airline networking forums such

as the 10th World Route Development Forum in Madrid,

where MAHB had one of the most outstanding booths.

During the year, Malaysia hosted the inaugural Human

Resource Development Working Group Meeting for the

ASEAN International Airports Association. In April 2004, MAHB

was one of four agencies that played host to the second

edition of New Route Asia, a forum that brought together

more than 150 airport and airline delegates to deliberate

on future market opportunities to Malaysia

Through such forums and personal visits to the airlines’

corporate headquarters, we have been aggressively

promoting KLIA to foreign carriers and establishing Malaysia

Airports as a brand name synonymous with the quality of its

services and facilities provided. Under our marketing

incentive programmes, we continued to offer rebates on

landing and parking charges for existing and new airlines

operating to KLIA, Penang, Kota Kinabalu, Kuching and

Langkawi. The offer was also extended to airlines operating

new frequencies and routes to KLIA.

Among the many awards and accolades MAHB received

during the year, perhaps one of the most satisfying is the

one accorded by the AETRA Airport Customer Satisfaction

Programme. Jointly conducted by Airports Council

International (ACI) and International Air Transport

Association (IATA), the AETRA survey covers the entire airport

experience of international and domestic travellers on

27 service-related parameters. The KLIA was ranked third for

the Best Airport Worldwide 2003, arguably one of the most

comprehensive and respected benchmarks for customer

satisfaction. In the most recent 2004 AETRA survey, KLIA

achieved second placing in the 15-25 million pax/year

category and fourth placing for overall satisfaction.

Considering that last year was only KLIA’s sixth year of

operation, it is gratifying that our ranking in major

benchmarking surveys has been improving steadily. This was

reaffirmed by other awards garnered in 2004: second in the

Best Airport category by the UK-based Telegraph Travel

Awards 2004; third in the Favourite Asian Airport category

by the TIME Readers’ Choice Awards survey and fifth in the

Airport of the Year 2004 by Skytrax Research, a British air

travel research company.


Our non-aeronautical operations have fared equally well, with Malaysia Airports (Niaga) Sdn. Bhd. which operated under

the brand names Eraman short-listed by Raven Fox as the top three ‘Best Travel Retailer Operating in a Single Country’

in the Asia-Pacific region. In recognition of its standing as Malaysia’s biggest airport retailer, Eraman has been accorded

Superbrand Company status by Superbrands Malaysia.

On the strength of the quality of its facilities and services, Pan Pacific KLIA was again named Best Airport Hotel in Asia

2004 by Business Asia and Bloomberg Television. This was the fourth time that Pan Pacific has won the award over the

past five years.

KLIA achieved two important industry certifications during the year. On 13 May 2004, KLIA received the Aerodrome

Certification from the Department of Civil Aviation, the first airport in the Asia Pacific region to be certified. This is a new

mandatory requirement of the International Civil Aviation Organisation (ICAO) stemming from increasing global concerns

on aviation safety due to the rapid growth of the air transportation industry. There is therefore a need to ensure that all

international airports provide uniform safety conditions for all aircraft. The certificate acknowledges that KLIA has met the

stringent requirements on Aerodrome Certification based on Annex 14 Convention on International Civil Aviation. Efforts

are currently underway to attain certification for the other international airports under our wing. However, by the year

2006 our plan is to have all our domestic airports certified as well.

Another feather added to our cap was the coveted Green Globe 21 (GG 21) certification for KLIA, which is a formal

endorsement of its status as the first environmentally friendly airport in the Asia Pacific region. GG 21 is the global

benchmarking, certification and improvement system for sustainable travel and tourism. It is based on Agenda 21, a

comprehensive programme of sustainable development actions endorsed by 182 Heads of State at the United Nations

Earth Summit in 1992. The certification achieved by the KLIA is the highest level of Green Globe qualification and is

renewed annually. Achieving this certification requires the implementation of an integrated Environmental Management

System. In our efforts to promote sustainability, we have adopted the ‘3Rs’ – reduce, reuse and recycle – as an integral

part of our operations. For our conservation efforts, the Main Terminal Building (MTB) of KLIA was also placed the first

runner-up for the 5th ASEAN Energy Award 2004.

In the continual effort to improve all aspects of airport operations, one of the most important tools at our disposal is

registration to the internationally recognised ISO system of quality management. As we have stated in our Annual Report

last year, MAHB is aiming for group-wide ISO certification and the year in review saw us moving closer towards this target.

Within KLIA, a total of 7 key operating units and divisions have already been certified to ISO 9001:2000, while other units

and divisions are at varying stages of obtaining registration. The other four international airports have been similarly

accredited during 2004. Documentation for 10 domestic airports has been completed and we are on track for targeted

certification in 2005. The remaining domestic airports will be ISO-certified in 2006.


Major strides were also taken to improve security and safety

in the MAHB system of airports. During the year MAHB

commissioned a consultant group from the UK to undertake

a critical review of the security of the KLIA. The audit report

submitted by the consultant concluded that ‘security at

KLIA is of a good standard and is in full compliance with

the International Civi l Aviation Organisation (ICAO)

standards and recommended practices’. Notwithstanding

the high marks we received, MAHB has beefed up the

security system at KLIA with an additional 256 newly

appointed auxiliary policemen and women.

One of the investments in airport fire and rescue service in

2004 was our RM2.0 million aircraft simulator to enhance fire

rescue operations at the KLIA. Modelled after a Boeing 737

aircraft, the simulator enables our Airport Fire and Rescue

Services to have the hands-on experience in dealing with a

scenario of an aircraft crash.

MAHB continued to make headway in its overseas

expansion plans. New ground was broken in our efforts to

gain a foothold in India. On 20 December 2004, witnessed

by YAB Dato’ Seri Abdullah Hj Ahmad Badawi, Prime

Minister of Malaysia, MAHB signed two agreements for the

development of the Hyderabad International Airport in

India. MAHB’s involvement in the venture as by way of an

11% equity interest in Hyderabad International Airport

Limited (HIAL). The Group will also assist HIAL in the

operations and maintenance of the proposed new airport.

It may be pointed out that MAHB is the first airport operator

in Southeast Asia to be awarded a concession for the

development of airports in India. The Group has also

expressed its interest to participate in the development of

the New Delhi International Airport and the Mumbai Airport

projects in joint venture with Indian-based companies.

Meanwhile, opportunities continue to unfold in the global

village. Currently, we are looking at investment opportunities

in the Middle East, our specific areas of interest being the

planning and management of airports. We are in the

process of identifying suitable local partners to form a joint

venture to participate in these projects.


The Commercial Division is primarily responsible for the

management of all non-aeronautical activities at the

Airports operated by the Group. It derives revenue

generated from the rental of commercial space for retail,

food and beverage (F&B) outlets, lounges, offices, service

counters, storage areas and for advertis ing and

promotional activities, among others.

One of the main tasks and challenges facing the

Commercial Division is to increase the contribution from the

commercial activities. Several strategies have been drawn

up and will be implemented in the coming financial year.

The Commercial division plans to improve the retailing

standards and presentation at KLIA. Bigger shops, better

brands and more varied selections will be introduced. The

development wil l be implemented in stages. When

completed, KLIA is set to raise the standards for totally new

airport retail and dining experience.

The Commercial Division is responsible for the following main objectives:

• To increase non-aeronautical revenue

• To transform KLIA into a preferred shopping destination in the Asian region

• To increase average dollar spending per passenger

• To enhance existing facilities and services at the Airports

Empirical studies point to the correlation between

‘passenger awareness’ and ‘shop visitation’ and ‘actual

purchase’ by the passenger. In order to increase average

spending per passenger, passengers must first be aware of

the range of products, services and facilities available at the

KLIA. To maximise awareness, the new retail development

plan will feature open malls, emporiums and island outlets,

supported by retail signages and information leaflets.

More effort will be devoted towards improving customers’

perceptions of KLIA’s product and service offerings. This will

involve a paradigm shift in the mindsets and attitudes of

customers to one that recognises value for money. To

reinforce this new perception, KLIA will set a ‘lowest price

guarantee’ on selected items. In this way, we hope to

establish the groundwork for building long-term loyalty

among customers.

C O M M E R C I A L A C T I V I T I E S

30- 31

As mentioned earlier, the KLIA has fared well in the global

ranking scale. Not only are we consistently placed at the

top end, over the years we have progressively improved on

our ranking. However, I personally feel that we have the

potential to do better.

One of the key performance indicators of our success as

an airport will revolve around the customer experience.

Consistency in high-quality customer experience will build

the KLIA’s and MAHB’s brand and reputation. This in turn will

ensure that more airlines and therefore more passengers will

travel to Malaysia. How successful we are in delivering the

best possible customer experience will be the acid test in

the coming year.

Today’s customers are more discerning and demanding.

Many have travelled the world, they have seen the best

there is on offer, their spending power is greater and it

follows that their expectations are also higher. The demands

of this new breed of global travellers are varied. If we use

the AETRA Customer Satisfaction Measurement and

Benchmarking programme as an indicator, there are at

least 27 service elements to be considered. These range

from connectivity, ease of passage through the airport,

service facilities and delivery, cleanliness, ambience,

security in place, safety to value-for-money shopping.

Our certification to the ISO standards, GG 21 and Aerodrome

Certification undoubtedly addresses some of these areas

and are indicative of the KLIA’s status as a world-class

facility. We need a more focused approach to determine

our strengths and weaknesses, and thereafter work to

improve on them to remain in the top league. We have

always relied on customer feedback to improve our facilities

and services. Suggestion boxes are strategically placed

throughout the airport for customers to air their views. Their

suggestions and any complaints are taken very seriously and

acted upon promptly. To cite a few examples, we have

taken measures to reduce lengthy queues and expedite

check-in procedures, without compromising on either safety

or security. We have also addressed the problem of touts

soliciting business at the airport exit, by stationing security

personnel at strategic locations. Wherever possible, we take

a proactive stance in introducing improvements. In

September 2004, for instance, MAHB became the first airport

in Asia to launch an e-timetable at the KLIA. The e-timetable

allows travellers to access the schedules of all direct and

connecting flights to, from and via the KLIA.

The coming year will see MAHB embark on an aggressive

programme to bring the KLIA to a new level of customer

satisfaction. Called the Airport Customer Satisfaction and

Performance Programme, this is essentially a benchmarking

tool to assess the customer experience at our airports on a

wide range of service elements. The results will provide

empirical data on the perceptions of international, domestic

and transit travellers, which will serve as an index to measure

the service quality at our airports. The data will be compiled

through various methods, including questionnaires, check-

sheets, site observation, interviews and surveys. By pinpointing

our areas of weaknesses, we can be more precise in adopting

corrective action and the appropriate improvements.


A NEW LEVELOF CUSTOMER SATISFACTION


Corporate social responsibility has always been an integral part of the way we conduct our businesses.

At MAHB, our efforts to play a meaningful role in society have evolved over the years. Each year, we set aside

sizeable sums in support of many charitable organisations and other worthy causes. Our subsidiaries are also

playing their role as responsible corporate citizens. Malaysia Airports (Niaga) has organised various charity

drives to coincide with their promotional events, the biggest being the Charity Gala Dinner in conjunction with

the 9th Miss Tourism International Pageant 2004.

However, our involvement with the community may not always be in the form of a cheque donation.

Sometimes, we find we can play a more meaningful role through our many outreach programmes. MAHB

organises and coordinates visits and tours for school children, college and university students, members of the

media, clubs and associations, employees of various government and private agencies. Such programmes are

designed to inform and educate the public on what MAHB is all about, and the kinds of facilities and services

we provide to serve the nation’s interest. It is not only kids but also the old folks who find a visit to the KLIA a

real treat. On our part, we welcome such visits and in the true tradition of Malaysian hospitality, we try our

best to make these airport tours memorable. In conjunction with KLIA’s 6th Anniversary celebrations, we hosted

two separate tour programmes for 69 kids from an orphanage in Kuala Langat and 32 residents of an old

folks’ home in Dengkil.

The Chairman, in his statement has mentioned the role we played in waiving the landing and parking charges

for the ORBIS programme and in the world-wide relief effort to help the victims of the tsunami disaster. This is

MAHB’s corporate contribution towards the tsunami relief effort, but I would also like to commend our people

for responding so quickly and generously. Three associations within the Group, namely Masjid KLIA, Tabung

Derma KLIA and Kelab Sukan Malaysia Airports each came up with a donation of RM10,000. Our Women’s

Association AERONITA organised a drive to collect new and used clothing to be forwarded to the tsunami

victims. In all these efforts, our people are demonstrating core corporate values of caring and sharing.

CORPORATECITIZENSHIP


MAMTS’ core business is the provision of management, maintenance and technical services in connection with

the airport industry. In line with other subsidiaries and operating divisions within MAHB, the company has been

certified to MS ISO 9001:2000 quality management system in 2004. The scope of registration covers four broad

areas, namely: provision of technical advisory and consultancy services for the management of airport cleaning

services; management of airport cleaning services; monitoring of the quality of airport services; and provision of

project management consultancy services.

MAMTS’ strengths lie in its considerable knowledge and experience in project and construction management.

Over the years, the company has been responsible for providing airport management and technical services to

ensure the smooth operations of the Group’s airports throughout Malaysia. With opportunities unfolding in the

international marketplace, MAMTS is now ready to expand beyond national boundaries.

On 20 December 2004, MAMTS entered into a Technical Services Agreement with Hyderabad International Airport

Ltd. (HIAL) to provide a range of services, such as reviewing the master plan, facilities planning, design review for

technical and operations, operations and maintenance strategy and manpower planning. MAHB will also provide

guidance on various certification requirements, advice on commercial strategies, service level standard,

environmental matters, airport emergency planning, airport security planning, ICT strategy, value management

and privatised packages on landside development.

MANAGEMENT & TECHNICAL SERVICES SDN. BHD. (MAMTS)

OTHER BUSINESS ACTIVITIES

M A L A Y S I A A I R P O R T S

Malaysia Airports (Niaga) Sdn. Bhd., which operates under the brand

name Eraman, is among the country’s largest airport retailers. Eraman has

more than 40 retail outlets under its wing, carrying a range of

merchandise to meet the varied tastes of the souvenir hunter to the most

discerning global traveler. On the food and beverage (F&B) front, Eraman

manages some 24 food and beverage outlets at the KLIA, with fares

ranging from fast food to specialty dining, Oriental, Asian or Western style.

The year under review was a successful and memorable one for the

company. Not only was the sales performance the highest since

business started 10 years ago, but it was also a year of awards and

accolades. The commendable sales performance was attributed to

improve traffic growth at KLIA, complemented by aggressive

promotional activities throughout 2004. Additionally, several new retail

and F&B outlets commenced operations during the year namely Palms

Grill and Bar, Starbucks Coffee and the 1901 Hot Dog Kiosk. Among the

accolades, Eraman received a Raven Fox Award for being placed

among the top three in ‘The Best Travel Retailer Operating In A Single

Country In Asia/Pacific’ category. This award is a prestigious recognition

in the travel retail industry. Eraman was also accorded Superbrand

status by Superbrands Malaysia in May 2004. In its bid to strive for

continual improvements, Eraman earned certification in October 2004

to MS ISO 9001:2000, the scope of registration covering the provision of

“Frontline Services for Airport Retail Operations”. Eraman was recognised

and listed in the Malaysia Book of Records as the first Airport Retailer in

Malaysia to receive the MS ISO 9001:2000 certification.


(NIAGA) SDN. BHD. (ERAMAN)

It was also an activity-filled year for Eraman,

with promotional events organised for

almost every month of the year. These

promotional activities were organised in line

with MAHB’s efforts to promote KLIA as more

than just an airport. Shopping and dining

are an integral part of the Airport

Experience, and MAHB’s goal is to ensure

that KLIA will be a pleasantly memorable

one. In many instances, the events

organised by Eraman serve more than just

the promotional or publicity angle. Many of

these events are organised around themes

designed to showcase Malaysia’s myriad

attractions. Wherever possible without

forgetting its social commitment, Eraman

also organises charity drive in conjunction

with these events, with the proceeds going

to charitable organisations.



The calendar of events was kicked-off by the ‘Stay Shop and

Spend’ campaign held in collaboration with Pan Pacific KLIA.

Hotel guests were given discount vouchers to be redeemed

at participating retail outlets. In celebration of Mother’s Day

and Father’s Day, Eraman ran ‘The Greatest Love of All’

campaign where exclusive greeting cards were presented to

all those who made purchases at Eraman outlets. In

conjunction with the 6th Anniversary of the Food Garden,

Eraman hosted the ‘Fiesta Makan-Makan’, featuring a

dizzying array of local and international fare. In response to

the Government’s call to further promote the development

of SMEs, Eraman, collaborated with the Federal Agriculture

Marketing Authority (FAMA) and invited several local SMEs to

display their products during the period.

Eraman has also taken to the air in its publicity campaigns.

Together with Sistem Televisyen Malaysia Berhad (TV3), we

came up with a programme ‘Seronok Berbelanja Di KLIA’

showcasing the best that KLIA had to offer in terms of retail

and F&B outlets. Then in conjunction with the National Day

celebrations, Eraman ran a campaign ‘Proud To Be

Malaysian’ on a local radio station. As part of the festivities,

the Eraman Merdeka celebration was held at the Main

Terminal Building of KLIA, where fans were treated to

performances by local artistes and an Australian pop group

called North.

As a further effort to promote tourism, Eraman in a joint-

promotion with Malaysia Airlines, launched the ‘Flights of

Shopping’ campaign in Vietnam, where discount vouchers

were given to passengers travelling by Malaysia Airlines. The

vouchers enabled these passengers to enjoy exclusive

discounts when shopping at KLIA. The ‘KLIA Ramadhan Fest

2004’ was organised during the Muslim holy month, reprising

the overwhelming success of the previous year. The month-

long Ramadhan Fest featured over 36 vendors and

attracted more than 100,000 visitors.

For the third consecutive year, Eraman was one of the main

sponsors for the 9th Miss Tourism International Pageant 2004.

The company also sponsored the Miss Eraman Elegance

International title, one of the subsidiary titles awarded at

the pageant. Aptly themed “Bringing the World to KLIA”,

this is a part of Eraman’s initiative to put KLIA in the world’s

tourism map. Also in conjunction with the event, Eraman

organised a charity gala dinner raising RM48,000 for four

charities. The year ended with the ‘Fun-Tastic Week’

campaign’, a bazaar offering a variety of products for sale,

food delights and fun-filled activities to keep the children as

well as the young-at-heart occupied. This was a memorable

end to an exciting year, and an appropriate way to

complement the year-end festive season.

MAAH’s principal activity is the cultivation and management

of the Group’s 7,225 hectares of plantations around the

KLIA and the Kota Bharu Airport, planted with oil palms and

coconut trees. In 2004, MAAH derived a revenue of RM16

million, 80% of which was generated by the sale of fresh

fruit bunches. The company also undertakes some of the

horticulture-related activities of the Group, carried out on

662 hectares of land around the KLIA and Subang Airport.

M A B A G R I C U L T U R E- H O R T I C U L T U R ESDN. BHD. (MAAH)


A wholly owned subsidiary of MAHB, KLAH is the owner of luxury class

hotel known as Pan Pacific Hotel Kuala Lumpur International Airport.

For the fourth time in five years, the Pan Pacific KLIA has been

voted the ‘Best Airport Hotel in Asia 2004’ by Business Asia

Magazine and Bloomberg TV. One of the most sought-after prizes in

the highly competitive Asia Pacific hotel industry, the award

honours the top business hotels from 14 countries in 17 different

categories. Judging is based on a range of criteria from special

business services, business club and lounge facilities, conference

and convention facilities to rewards programmes. Readers of

Business Asia and viewers of Bloomberg TV vote for their favourite

business hotel in participating countries.

With easy access to the KLIA, the Pan Pacific KLIA is not only the

hotel of choice among business travellers but also among motor-

sport enthusiasts as the only 5-star deluxe hotel within the vicinity of

the SIC. The hotel’s well-appointed facilities include a 24-hour food

and beverage outlet, a ballroom that can accommodate up to

1700 pax for receptions, a 184-seater auditorium, two business

centres and wireless Internet access in the lobby and lounge areas.

SDN. BHD. (KLAH)

K L A I R P O R T H O T E L

36- 37

As the Information Technology (IT) flagship company for the Group, MA Tech

ensures maximum operability and performance of the KLIA Total Airport

Management System (TAMS). MA Tech spearheads the Group’s Information

Communication Technology (ICT) thrust to engage the market, presenting as

range of ICT solutions and services.

MA Tech is working continually towards improving the TAMS through increased

research and development (R&D) efforts centred on the assimilation of new

technology and convergence of business needs. To this end, the Company has

established strategic alliances with some of the biggest names in the ICT industry.

These alliances have allowed MA Tech to expand its knowledge base and build

a core team of experts in the various IT fields. In its efforts to improve on service

delivery, MA Tech has adopted the best in industry practices to achieve process

improvement.

ICT will continue to feature prominently in the group-wide effort to improve KLIA’s

standing as a world-class airport. Projects to enhance the efficiency, productivity

and performance of KLIA include the development and migration to GE Network

technology, new gate allocation system and the upgrading of the baggage

handling system.

MA Tech has retained its ISO 9001:2000 accreditation for four consecutive years,

while its certification to OHSAS 18001:1999 has now entered its second year. Its

other credentials include the BS7799 Part 2:2002 Certification, an internationally

recognised standard for Information Security Management Systems. MA Tech

personnel have also obtained the IT Infrastructure Library (ITIL) Certificates for IT

Service Management.

TECHNOLOGIES SDN. BHD. (MA TECH)




Through APAC, the Group also operates an auction centre located at Subang. During the year, the

Ministry of Finance appointed APAC as its agent for the disposal of assets belonging to various

government ministries. APAC posted an operating revenue of RM9.4 million for the year under

review. A total of 75 auctions were held in 2004, to dispose of vehicles, machinery and general

goods. APAC also organised a 2-day regional machinery auction at its main premises in Subang.

The company’s revenue stream has been boosted by event management activities staged at

APAC’s premises, such as the 9th Defence Services Asia Exhibition and Conference and the 15th

International Exhibition on Precision Engineering, Machine Tools and Metalworking Technology.

CIRCUIT SDN. BHD. (SIC)

AUCTION CENTRE SDN. BHD. (APAC)

S E P A N G I N T E R N A T I O N A L

As a subsidiary of MAHB, SIC aspires to be the hub motorsports and to promote the world-class

Sepang F1 Circuit as a key destination for motorsports activities including motocross and 4x4 off-

road events. Apart from the prestigious Formula One Grand Pix, other motorsports events organised

by SIC in 2004 included the Marlboro Malaysian Motorcycle Grand Prix, the Japan GT

Championship Malaysia, the first ever Formula Nippon Championship Malaysia, the 12-hour Merdeka

Millennium Endurance race and a six-round Malaysian Super Series.

A S I A P A C I F I C


We are hopeful that the coming financial year will continue to be a good one for the aviation

industry and our business of operating airports. We believe that passenger movements at all airports

operated by the Group will continue to grow. We are not sparing any effort to attract more airlines

to hub at KLIA. Traffic growth will also come from the expanding activities of the LCC, more charter

flights from countries like China, higher frequencies of certain flights and addition of new destinations.

Operationally, 2005 will be a very busy and eventful one with several projects ready to take-off.

The contract for a new check-in system at the KLIA has already been awarded, and system

commissioning is expected to take place in October 2005. The upgrading of the gate allocation

system will be carried out in stages, with the first phase due for completion in August 2005.

The second phase will be completed in January 2006.

Also high on our list is the development of a Low Cost Carrier Terminal at KLIA. The project is

targeted for completion by early 2006. Other priority projects include improvement and

redevelopment works for various airports operated by the Group. At the Penang International

airport, the construction and completion of runway resurfacing and associated works are

progressing as planned for due completion in August 2005. The redevelopment of the Kuching

International Airport, Sultan Abdul Halim Airport in Alor Star, Sultan Mahmud Airport in Kuala

Terengganu and the Sibu Airport in Sarawak are in progress. Targeted completion dates are

staggered, ranging from end-2005 to March 2008.

A NEWTAKE-OFF PHASE


We are also gearing up to meet the requirements of the

Airbus 380 (A380) aircraft in compliance with the ICAO

Code F requirements. A proposal has already been

submitted to the Government and we are presently in

the planning stage to upgrade various facilities. The

project is scheduled for completion by the end of 2006,

in time for Malaysia Airlines to commence A 380 flights

the following year. In the meantime, we are already

making presentations to ground handlers and other

relevant parties in readiness for the inaugural A 380 flight.

Because of the lead-times involved in getting some

projects off the ground, we need to plan ahead. While

the Low Cost terminal under construction will effectively

boost the KLIA’s passenger handling capacity by

another 10 million pax per annum, we are already

planning for Phase II Development of the KLIA. In this

regard, we are conducting a review of the KLIA Master

Plan to ascertain the development requirements to cater

for a handling capacity of 45 million pax per annum. The

Government will decide on the date of implementation

of the Phase II Development.

As a Group with vast ambitions for the future, we are

beginning to transform into concrete plans of action

some of the infinite possibilities open to us. The coming

years will also see the increasing internationalisation of

our operations adding a new chapter to our corporate

history. MAHB remains very much an unfolding story.

DATO’ SERI BASHIR AHMAD ABDUL MAJIDManaging Director

Being lost is an adventure in itself. Especially when

there are so many things to tempt you.

Just like our airport. Just like our city.

OUR AIRPORT IS AN ADVENTURE FOR SOME


42- 43

10 February 2004Dialogue Session Between Managing

Director MAHB and Media EditorsYBhg. Dato’ Seri Bashir Ahmad

(Managing Director MAHB) held adialogue session with the local printed

media agencies. The purpose of thisdialogue session was to educate and

update the media on currentdevelopment and address various issues

pertaining to Malaysia Airports.

23 February 2004First Ever Human Resource Meeting for Asean Airports Authorities LaunchedThe first-ever Human Resource Development WorkingGroup Meeting for ASEAN International AirportsAssociation (AAA) was launched with topicsdiscussed include the establishment of AAA HumanResource Development Working Group and sportsactivities which will be lead by Malaysia.

18 March 2004Malaysia Airports Welcomes Lufthansa’s Inaugural Flight to KLIAMalaysia Airports welcomes LufthansaGerman Airlines’ inaugural flight to KLIA,marking one of the biggest achievements of Malaysia Airports marketing efforts.Lufthansa starts operating four flights weekly on the Frankfurt – Kuala Lumpur vice versa route.

Calendar Of Significant Events


19-21 March 2004Petronas Malaysian Grand Prix 2004Sepang International Circuit againplayed host to this international event where thousands of spectatorsthronged the circuit to watch it live while thousands Formula 1 fanaround the world watched the live telecast.

30 March 2004Qatar Airways Increases Frequency To KLIAQatar Airways increased its frequency fromfive to daily flights for the Doha – KualaLumpur route. A welcome reception washeld to mark this event at KLIA.

16-20 April 2004Malaysia Airports Sports CarnivalEmployees of Malaysia Airports and itssubsidiaries gathered in Kuantan,Pahang for the Malaysia AirportsSports Carnival 2004, which sawMalaysia Airports (Sepang) Sdn. Bhd.emerged as the overall winner.

11-15 April 2004APAC Hosted DSA 2004

Asia Pacific Auction Centre (APAC) hosted the Defence ServiceAsia (DSA) 2004 from 11-15 April 2004. The 9th DSA, which drew

some 20,000 visitors, provided opportunities to Malaysiancompanies to showcase their capabilities and expertise in the

defence-related industry. The exhibition was described by YB Datuk Seri Najib Tun Razak, Deputy Prime Minister as a high

quality exhibition and a great success.

44- 45

Calendar Of Significant Events (cont’d.)

12 April 2004New Terminal Building for

Kota Bharu Airport LaunchedThe Sultan of Kelantan, accompanied by YB Dato’ Sri Chan Kong Choy, Minister ofTransport Malaysia, officially launched the

Sultan Ismail Petra Airport in Kota Bharu in a glorious ceremony attended by

hundreds comprising guests and media. The launching was held in conjunction

with the celebration of DYMM SultanKelantan’s birthday celebration.

26 April 2004Second Annual New Route AsiaLaunchedMalaysia Airports hosted the secondedition of New Route Asia, whichattracted more than 150 airports andairlines delegates launched today atthe JW Marriot Hotel, KL. The forum wasdesigned to bring airlines and airportstogether to discuss future marketopportunities, with the reputation ofbeing the only regional event focusedentirely on the development of airservices within the Asia Pacific region.

5-9 May 2004APAC Hosted MTA 2004APAC hosted the 15th International Exhibition on PrecisionEngineering, Machine Tools and Metalworking Technology (MTA)featuring a wide range of precision engineering, machine tools andmetalworking technology for the IT, Electrical, Electronics, Shipbuilding,Aerospace and Automotive industries.

13 May 2004KLIA the First Airport in Asia Pacific to Achieve

Aerodrome CertificationKLIA received its Aerodrome Certification from Department of

Civil Aviation (DCA), certifying that the ultra-modern airport hasbeen audited and meets the Aerodrome Certification requirement

by International Civil Aviation Organisation (ICAO). KLIA was the firstairport in Asia Pacific region to achieve the recognition.

27 May 2004Malaysia Airports

Annual General MeetingMalaysia Airports held its fifth

Annual General Meeting (AGM) atPan Pacific Hotel KLIA during

which the Group’s 2003 financialresults were tabled and adopted.


24 May 2004KLIA The First Environmental FriendlyAirport In Asia PacificKLIA received the Green Globe 21certification, which made it the firstenvironmental friendly airport in AsiaPacific. Green Globe is a globalenvironmental program for thetravel and tourism industry.

27 May 2004Fire Emergency And Evacuation Drill At KLIATo ensure all agencies at KLIA are always well prepared in caseof fire emergency at KLIA and to ensure evacuation at thedesignated zone and floor of building is carried out in an orderlyand smooth manner, Malaysia Airports conducted a FireEmergency and Evacuation Drill at Zone 5, Ground Level, MainTerminal Building, KLIA today. This drill was also to test andevaluate the effectiveness of Airport Emergency Procedure (AEP)for fire evacuation emergencies at KLIA.

46- 47

19 June 2004Malaysia Airports Received MS ISO CertificationMalaysia Airports received yet anothercertification from SIRIM Berhad when its TrainingCentre in Penang received the MS ISO 9001-2000 Quality Management System. The scope ofregistration for this certification includes theprovision of civil aviation security and firefighting trainings at airports.

1 July 2004 & 31 December 2004Human Performance Management Release 3 & 4For the year 2004, it was roll out to the Executives and Supervisory levelof the population involving 1208 stakeholders. The HPM includesdeveloping the HPM Guide, HPM Forms and ratings, Personal CareerGuide, Policies & Procedures, Incorporated HR support structures andCoaching & moderation exercises to all stakeholders.

30 June 2004KLIA Celebrates 6th AnniversaryKLIA celebrates its 6th anniversary today, marking it with receptions for its 93rd million passenger (total) and 30th million passenger (domestic).The celebration included cake cutting and free rides in Airport Limo’sbrand new Jaguar S-Type Limo for the two lucky passengers.



3 July 2004Orphans Visit to KLIA

In conjunction with KLIA’s 6thanniversary celebration, Malaysia

Airports organised a visit fromPertubuhan Rumah Anak Yatim

Miskin, Daerah Kuala Langat,Sungai Buaya. A total of 69

orphans visited the Main TerminalBuilding and Satellite Building.

At the end of the visit, Encik AzmiMurad presented RM6,000.00 fromTabung Derma KLIA to the home.

17 July 2004Launching of Fiesta Makan-makan @ KLIA Promotion by Eraman MalaysiaIn conjunction with KLIA’s 6th anniversary, Eraman Malaysia launched the Fiesta Makan-makan @ KLIA promotion which was held from 17 to 31July 2004. The fiesta was aimed at promoting a variety of local andinternational delicacies available at KLIA.

15 July 2004Limbang New Airport CommencedOperationsAnother milestone in the nation aviation’shistory was written today when LimbangAirport relocates to a new and modernairport, situated 4.8km from Limbangtown. It has the capability to handle upto 250,000 passengers annually and theapron is capable of handling two Fokker50 and one Twin Otter at any one time.

20 July 2004Old Folks Visit From Yayasan Al-Jenderami To KLIAIn conjunction with KLIA’s 6th anniversarycelebration, Malaysia Airports organised a visit fromold folks home, Yayasan Al-Jenderami, JenderamHilir, Dengkil, Selangor to KLIA. To discover andexperience the airport’s operations, 32 from theold folks home visited the Airside Area andSatellite Building KLIA.

48- 49

1 August 2004Cabin Luggage Control Policy At AirportsEffective today, all airlines operating inMalaysia enforced the ‘one passenger,one cabin luggage’ rule for domesticand international flights. This policycontrols and restricts the number andsize of hand luggage allowed into thecabin of aircraft as recommended byInternational Air Transport Association(IATA). Malaysia Airports as the operatorof airports in Malaysia provides fullsupport to facilitate the implementationof the policy.

7 August 2004Media Hunt And Golf Challenge 2004Malaysia Airports organised a Media Hunt and Golf Challenge 2004with the objective to further enhance its relationship andnetworking with the media. More than 50 cars took part in theMedia Hunt 2004, which was flagged off at Malaysia Airportsheadquarters and ended at A’Famosa Resort while 23 members ofthe media pitted their skills at A’Famosa Resort Golf Course.

28 July 200412th Foreign Carrier for Penang

Korean Air became the 12th foreign carrier to operate to Penang InternationalAirport when its maiden flight touched down today. Korean Air operates three flightsweekly on Mondays, Wednesdays and Fridays. A welcome reception was organised

to commemorate the inaugural flight.



1 September 2004Seronok Berbelanja Debuts On TV3

Beginning 1 September 2004, TV3 and Eramancollaborated to produce a brand new segment titled

‘Seronok Berbelanja Di KLIA’ and this segment will providetips as well as bring viewers to the locations to find out

what’s new, what’s different and what’s hot at theshopping and food outlets in KLIA.

18 September 2004Malaysia Airports Increased its

Aviation Security PersonnelMalaysia Airports beefed up security level at allairports under its operations when 256 aviation

security trainees completed their aviation SecurityAssistant Basic Course. The fitting of new uniforms,with identical colour and specifications to that of

the Royal Malaysian Police Force (PDRM), for allits airport Auxiliary Police officers and personnel

was also introduced during the same ceremony.

11 September 2004Malaysia Airports Employees Completed the UMCCED StudyThirty Malaysia Airports personnel successfully completed theirExecutive Diploma in Management course conducted by theUMCCed. Twenty eight of them received their diplomas on11 September 2004 in a Convocation Ceremony held at theDewan Tunku Canselor, University Malaya.

20 September 2004Flights Of Shopping

In a joint promotion with MalaysiaAirlines, ‘Flights Of Shopping’ campaign

was launched in Vietnam today tofurther reward travellers and encourage

them to shop and spend at EramanMalaysia outlets in KLIA. The objective of

this campaign was to strengthen andpromote the Eraman brand among

travellers as well as to build a strategicalliance with Malaysia Airlines.

50- 51

8 October 2004Launching of the KLIA Ramadhan Fest 2004Malaysia Airports (Niaga) Sdn. Bhd. (Eraman)today launched the Ramadhan bazaar at KLIA which was officiated by YB Datuk Dr. Leo Michael Toyad, Minister of Tourism, Malaysia.During the same ceremony, representingMalaysia Airports, Dato’ Seri Bashir Ahmad,presented a RM5,000.00 cheque to QalamAfghanistan as a contribution towards theconstruction of an education centre in Kabul,Afghanistan.

8-10 October 2004SIC Hosts Another Edition of MotoGP

Sepang International Circuit hosted the 5thMarlboro Malaysian Motorcycle GP wherethousands of spectators watched it live at

the circuit while other motor racingenthusiasts all over the world watched the

live telecast.

26-28 September 2004Malaysia Airports Takes Part In RoutesMalaysia Airports took part in the 10th World Route Forum(Routes) in Madrid, Spain with the aim to attract new airlines toMalaysia and to encourage those already flying here toexpand their network out of KLIA. At the forum, MalaysiaAirports also launched the KLIA e-timetable, becoming the firstairport in Asia to offer air travelers such a facility.



12 October 2004Familarisation Tour at KLIA

Malaysia Airports organised a familarisation tourto related areas involved in emergency

situation at KLIA for all the internal and externalagencies. On the same day, the RM2 million

aircraft simulator, specialy built for aircraft crashtraining, was revealed.

28 October 2004Orphans & Single Mothers were all smiles at the KLIA MosqueHeld at the KLIA Mosque in conjunction with the month of Ramadhan, MalaysiaAirports, in collaboration with the Pan Pacific Hotel Kuala Lumpur InternationalAirport, brought smiles to orphans and single mothers by giving away duit rayaand other daily needs.

22 November 2004Orbis Flying Eye Hospital at Subang Airport34 Malaysians boarded the Orbis Flying Eye Hospital, in form of DC-10 aircraft and received the gift of sight when it utilised SultanAbdul Aziz Shah Airport, Subang for its base from 22 November 2004to 2 December 2004. Vertus Barak, Administrator Coordinator of ORBISin complimented the airport staff for their support and commitmenttowards the success of the programme.

30 October 2004Eraman Malaysia Entertained 80 Orphansat KLIAEighty orphans from the Persatuan Anak-Anak Yatim/Miskin Kuala Langat and theRumah Laki-Laki Tun Abdul Aziz, Melakawere entertained by Eraman in a joyfulatmosphere at KLIA. The ceremony,Malam Sekalung Budi Jalinan Kasih washeld to cheer and entertain the lessfortunate children. During the ceremony,Eraman Malaysia gave away someclothes and duit raya to these children.

52- 53

1-2 December 2004Regional Machinery Auction held at APACAPAC’s inaugural 2-day regional machinery auctionwas held on 1-2 December 2004 at the mainpremises in Subang, Selangor and the following dayat third party premises in Bentong, Pahang. Theauction, which was anchored by an internationallyrenowned West European engineering companyand a leading Malaysian Main Board public listedcompany, boasted sales totalling RM5.5 million,including successful sale of an 80-metre steel cargoship for RM1.15 million.

18 December 2004Miss Eraman Elegance International 2004 Charity Gala DinnerMiss Maria Gabriela Perez from Venezuela was crowned MissEraman Elegance at the Gateway Ballroom of the Pan PacificKuala Lumpur International Airport which was organised byEraman. Miss Eraman Elegance International is one of thesubsidiary titles offered in the Miss Tourism International 2004pageant. Aptly themed, the event is called “Bringing The World ToKLIA” as a further effort to put KLIA on the world’s tourism map.

12 December 2004Mesra Aidilfitri Malaysia AirportsAt Majlis Mesra Aidilfitri held at the Pan Pacific HotelKuala Lumpur International Airport, Malaysia Airportstreated orphans and disabled children with a varietyof kuih raya. During the ceremony held as part ofMalaysia Airport’s effort to promote a loving andcaring society, the children were also presented with duit raya as well as their daily needs andschool gears.



19 December 2004KLIA Hot Fun Run

Pan Pacific Kuala Lumpur International Airport organised a charityevent namely, ‘KLIA’s Hot Fun Run’. The objective of the event is

to raise funds in support of Nilai Cancer Institute Research Fundand as well as to create a unique annual event at KLIA.

Participation in the event is by donation of RM500.00 per teamcomprising of ten team members. Funds generated from the

event was donated to the Nilai Cancer Research Fund.

21 December 2004Malaysia Airports Signed Two Agreements For Hyderabad International AirportWitnessed by YAB Dato’ Seri Abdullah Hj. AhmadBadawi, Prime Minister of Malaysia, Malaysia Airportssigned two agreements in regards to the developmentof Hyderabad International Airport, India. MalaysiaAirports is the first airport operator company in SouthEast Asia to be given the concession for thedevelopment of the airport in India. It is also the firstoverseas venture in India for Malaysia Airports.

31 December 2004Donation To Malaysian Tsunami Disaster FundMalaysia Airports today donated RM30,000.00 to NST-BH-TV3-8TV Malaysian Tsunami Disaster Fund with the hopeto help ease the pain and suffering of the victims.Masjid KLIA, Tabung Derma KLIA and Kelab SukanMalaysia Airports (KESUMA) contributed RM10,000.00each for this donation.

We try our very best to make it as difficult as possible

for you to leave our airports. Most people get so comfortable,

they always leave hoping to return.

WHERE COMFORT EQUALS NEVER WANTING TO LEAVE


Documents

Infinitepossibilities - I3investor