A BREAKTHROUGH YEAR ANNUAL REPORT 2023
INSIDE THIS REPORT PROLOGUE 2 Basis of this report 40 Our Approach to Value Creation 42 Value Creation Model 44 Our Strategy 58 Material Matters 78 Stakeholder Engagement 87 Financial Review 100 Operational Review 124 Our Approach to Sustainability 130 Sustainability Review 158 Sustainability Performance Data 174 Bursa Malaysia Indicators 176 GRI Content Index 179 Independent Assurance Statement 184 Board of Directors 186 Board of Directors' Profile 194 Group Senior Management 196 Group Senior Management's Profile 203 Subsidiaries Senior Management's Profile 208 Corporate Governance Overview Statement 251 Board Audit Committee Report 255 Statement on Risk Management and Internal Control 262 Dividend Policy 263 Additional Compliance Information 14 Chairman's Statement 26 Group Chief Executive Officer's Message OUR LEADERSHIP STATEMENT 03 OUR VALUE CREATION STRATEGY 04 OUR PERFORMANCE 05 OUR GOVERNANCE 06 4 Malaysia Airports at a Glance 8 Where We Operate 10 Corporate Information 11 Corporate Structure OUR INVESTMENT CASE
Our Value Creation Strategy Our Performance Our Governance Additional Information 1 264 Statement of Workforce 265 Airport Statistics 267 Analysis of Shareholdings 271 Share Price, Volume Traded and Market Capitalisation 272 List of Properties 278 Group Corporate Directory 279 Airport Directory 280 Notice of 25th Annual General Meeting 287 Statement Accompanying Notice of 25th Annual General Meeting 288 AGM Administrative Details • Form of Proxy • Annual Report Requisition Form ADDITIONAL INFORMATION 07 In a breakthrough year, Malaysia Airports strode confidently into a growth era following a successful recovery from the pandemic. To signify this transition, we set a threeyear strategy to identify and seize opportunities for expansion centred around reimagining the passenger experience at our airports. We firmly believe that prioritising passengers in our strategic approach is key to maintaining the competitiveness of our airports and increasing market share, especially as the aviation industry anticipates rapid expansion. The cover of this Annual Report depicts the rapid pace of our efforts and our journey to a bright future for the Group and its stakeholders. Culminating this pivotal year, we achieved outstanding financial results as our Malaysian operations returned to profitability. 2023 has also stood out as one of the most profitable periods in our corporate history. A BREAKTHROUGH YEAR More information on this report More information on our website www.malaysiaairports.com.my
2 INTRODUCTION This Integrated Report has been prepared with reference to the principles of the International Integrated Reporting Framework (<IR> framework) developed by the International Integrated Reporting Council (IIRC) and the recommendations in the Malaysian Code on Corporate Governance 2021 on integrated reporting. This report aims to provide our stakeholders with transparent, relevant and integrated information of our business strategy, performance, and future prospects as well as environmental social and governance (ESG) considerations, leading to the creation of stakeholder value over the short, medium and long-term. We are guided by our vision to be ‘A Global Airport Group that Champions Connectivity and Sustainability’ and are resolute in our brand promise of ‘Hosting Joyful Connections’. This report is prepared according to the following regulatory requirements: • Main Market Listing Requirements of Bursa Malaysia Securities Berhad; • Malaysian Financial Reporting Standards; • International Financial Reporting Standards; • Companies Act 2016; • Malaysian Code on Corporate Governance 2021; and with reference to the voluntary standards for sustainability reporting: • GRI Standards for Sustainability Reporting This report covers our financial and non-financial performance during the period from 1 January 2023 to 31 December 2023. Information presented relates to the principal activities of the Group and all its subsidiaries, unless stated otherwise. Detailed information on investments in which Malaysia Airports has no controlling interest is not included. Our value creation model is disclosed on pages 40 to 43. It outlines our focus on value creation which is driven by championing connectivity as a global airport group and the sustainability of airport communities that we serve. APPLICABLE REQUIREMENTS AND STANDARDS SCOPE AND BOUNDARY VALUE CREATION MODEL BASIS OF THIS REPORT
3 REPORTING SUITE The Reporting Suite for 2023 is similar to last year and comprises this Annual Report, Financial Statements and Airport Statistics. The full report is also available online on our corporate website at www.malaysiaairports.com.my MATERIALITY The content of our integrated report is dependent on the principle of materiality. We include matters that substantially affect the Group’s ability to create and sustain value over the short, medium and long-term. These matters are identified, prioritised and validated through a materiality assessment process that is described in this report. Our strategic responses to these material matters are presented in pages 58 to 75. FORWARD LOOKING STATEMENT This report contains forward looking statements, for example, Malaysia Airports’ future direction, strategies, and potential opportunities for growth. These statements are based on various assumptions and are subject to a number of risks, uncertainties and contingencies, many of which are beyond the control of the Group. Unanticipated events and actual future events may differ materially from current expectations due to new business opportunities, changes in priorities by the Group and other factors. ASSURANCE Malaysia Airports obtained independent third-party assurance for the following information: Content Assurance Framework Annual Financial Statements Reasonable assurance • Companies Act 2016 • Malaysian Financial Reporting Standards • International Financial Reporting Standards Statement on Risk Management and Internal Control Limited assurance • Bursa Malaysia Securities Berhad Listing Requirements Sustainability Review and Indicators Limited assurance • With reference to GRI Standards for Sustainability Reporting NAVIGATION ICONS Key Stakeholders Material Matters Six Capitals F Financial M Manufactured I Intellectual H Human S Social N Natural M1 Total Airport Experience M3 Economic Performance M2 Airport Safety and Security M4 Cybersecurity and Data Privacy M7 Integrity and Anti-Corruption M5 Regulatory Compliance M8 Talent Attraction and Development M9 Supply Chain Management M10 Biodiversity M6 Climate Change M11 Noise Management M12 Market Presence M13 Waste M14 Human Rights M15 Water Effluent M16 Contribution to Local Community S1 Airlines S3 Passengers S2 Regulatory Authorities S4 Business Partners S7 Tenants S5 Employees S8 Vendors and Service Providers S10 Media S11 Local Community S6 Capital Providers S9 Associations and Professional Bodies INFORMATION ON EXCLUSIONS Malaysia Airports’ disclosure appetite guides the limitation of information available in this report. Several requirements of the <IR> Framework have been excluded due to the unavailability of reliable information or specific legal prohibitions.
Our Investment Case Our Leadership Statement ANNUAL REPORT 2023 Our Investment case GLOBALLY, MALAYSIA AIRPORTS IS ONE OF THE WORLD’S LARGEST AIRPORT OPERATOR GROUPS, BASED ON THE TOTAL NUMBER OF PASSENGERS HANDLED ANNUALLY. 5 international airports 17 domestic airports 17 STOLports 39 throughout Malaysia airports Owns and manages 1 international airport in Istanbul, Türkiye OUR VISION BRAND PROMISE CORE VALUES A Global Airport Group that Champions Connectivity and Sustainability Hosting Joyful Connections Integrity, Customer-Centricity, Accountability, New Ideas Manages 4
Our Value Creation Strategy Our Performance Our Governance Additional Information Manage, operate and maintain airports, and provide airport-related services to ensure that airports operate efficiently, safely and securely with high service levels 4,045.5 million 510.8 million RM RM Group Passenger Traffic Movements 55.4% from 2022 20.5% from 2022 Malaysia Türkiye 81.9 million 37.6 million Malaysia Malaysia Overseas Overseas 2,284.2 million 136.0 million 1,761.3 million 374.8 million AIRPORT SERVICES RM RM RM RM 5
Our Leadership Statement ANNUAL REPORT 2023 6 Our Investment Case Operate duty-free outlets and provide management services for food and beverage outlets at designated airports Offer consultancy, facility management services, maintenance of information, communication technology business ventures and provision of mechanical and electrical engineering 577.0 million 154.7 million 71.9 million 21.1 million DUTY FREE AND NON-DUTIABLE GOODS PROJECT AND REPAIR MAINTENANCE Number of Retail Outlets 37 40 Number of Employees 620 631 Retail Area 12,352 sqm 13,033 sqm 2022 2023 RM RM RM RM Malaysia Malaysia Overseas Overseas 54.6 million 61.6 million 100.1 million 10.3 million Number of Employees 788 829 2022 2023 RM RM RM RM Our Investment case Our Malaysia operations comprises five key business activities which are airport services, duty free and non-dutiable goods, project and repair maintenance, hotel and agriculture and horticulture. For overseas operations, in addition to ownership and management of Istanbul Sabiha Gökçen International Airport (IATA Code: SAW) in Istanbul, Türkiye, we also provide services for operations and maintenance of airports and airport-related services. Listed on the Main Market of Bursa Securities since November 1999, Malaysia Airports’ market capitalisation stood at RM12.28 billion at the end of 2023.
Our Value Creation Strategy Our Performance Our Governance Additional Information 7 Cultivate and manage oil palm and other agricultural products, and undertake horticulture activities, primarily landscaping services and products Manage and operate hotels 105.3 million 31.6 million 2.1 million 17.0 million HOTEL AGRICULTURE AND HORTICULTURE RM RM RM RM * Total Revenue and Profit Before Tax and Zakat is for hotels in Malaysia. Revenue for hotel in Turkiye is RM 23.6 million, which is reported under Airport Services. Number of Hotels Number of rooms 4 720 592 Breakdown of rooms 128 Malaysia Türkiye Oil Palm Planted Area 6,247.1 ha Fresh Fruit Bunches 36,724.5 MT We are a constituent of the FTSE4Good Bursa Malaysia Index. As a signatory to the Aviation Industry Commitment to Action on Climate Change, we strive to create a pathway to carbon neutral growth and a carbon-free future. Malaysia Airports also holds memberships in the Airports Council International (ACI) and the ACI Asia Pacific Regional Environmental Committee. Competitive advantage • Malaysia is located in a strategic location – in the heart of ASEAN, surrounded by high growth markets such as China and India. • Competitive aeronautical and passenger charges - one of the lowest in the world. • Well-equipped airports with safety standards certified by global bodies such as ISO, British Standards Institution, and ACI. • Our flagship, KUL, is ranked No.9 globally for >40 mppa in the 2022 ACI’s Airport Service Quality rankings. • KUL’s two terminals have a combined capacity of 75 mppa. • KUL’s three independent runway system facilitates efficient flight operations. • 100 km2 land bank surrounding KUL allows for aviation-related and commercial development.
MALAYSIA • KL International Airport (KUL) • Kota Kinabalu International Airport (BKI) • Kuching International Airport (KCH) • Langkawi International Airport (LGK) • Penang International Airport (PEN) TÜRKIYE • Istanbul Sabiha Gökçen International Airport (SAW) • KL International Airport (KUL) • Kota Kinabalu International Airport (BKI) • Kuching International Airport (KCH) • Langkawi International Airport (LGK) • Penang International Airport (PEN) • Melaka Airport (MKZ) • Sultan Abdul Aziz Shah Airport, Subang (SZB) • Sultan Abdul Halim Airport, Alor Setar (AOR) • Sultan Ahmad Shah Airport, Kuantan (KUA) • Sultan Azlan Shah Airport, Ipoh (IPH) • Sultan Ismail Petra Airport, Kota Bharu (KBR) • Sultan Mahmud Airport, Kuala Terengganu (TGG) • Bintulu Airport (BTU) • Limbang Airport (LMN) • Miri Airport (MYY) • Mukah (MKM) • Mulu Airport (MZV) • Sibu Airport (SBW) • Labuan Airport (LBU) • Lahad Datu Airport (LDU) • Sandakan Airport (SDK) • Tawau Airport (TWU) • Pulau Pangkor (PKG) • Pulau Redang (RDN) • Pulau Tioman (TOD) • Bakelalan (BKM) • Bario (BBN) • Belaga (BLG) • Kapit (KPI) • Lawas (LWY) • Long Akah (LKH) • Long Banga (LBP) • Long Lellang (LGL) • Long Semado (LSM) • Long Seridan (ODN) • Marudi (MUR) • Kudat (KUD) • Long Pasia (GSA) • Semporna (SMM) International Airports Duty Free and Non-Dutiable Goods Short Take-Off and Landing Ports (STOLPORTS) Domestic Airports WHERE WE OPERATE Our Investment Case Our Leadership Statement ANNUAL REPORT 2023 8
Mukah (MKM) 0.3 mppa Sibu (SBW) 1.8 mppa Bintulu (BTU) 1.0 mppa Kuching (KCH) 5.0 mppa Sandakan (SDK) 1.4 mppa Labuan (LBU) 2.2 mppa Limbang (LMN) 0.07 mppa Marudi (MUR) Mulu (MZV) 0.05 mppa Tawau (TWU) 1.5 mppa Semporna (SMM) Long Banga (LBP) Lahad Datu (LDU) 0.1 mppa Kota Kinabalu (BKI) 9.0 mppa Lawas (LWY) Miri (MYY) 2.0 mppa Kapit (KPI) Belaga (BLG) Long Seridan (ODN) Long Pasia (GSA) Long Semado (LSM) Bakelalan (BKM) Bario (BBN) Long Lellang (LGL) Long Akah (LKH) Türkiye Airports • KL International Airport (KUL) • Langkawi International Airport (LGK) • Penang International Airport (PEN) • Sultan Abdul Aziz Shah Airport, Subang (SZB) • Sultan Ismail Petra Airport, Kota Bharu (KBR) • Hamad International Airport (DOH) Buildings • Airbus Helicopters Malaysia • Bank Negara Malaysia • Cainiao Aeropolis eWTP Hub • Malaysia Airports Corporate Office • Malaysian Research Accelerator for Technology & Innovation (MRANTI) • MAS Golden Lounge • Mitsui Outlet Park KLIA • Persada PLUS • Petronas Precinct Buildings - KLCC Twin Towers - KLCC Tower 3 (Retail Podium) - KLCC common estate & common facilities - Suria KLCC - Masjid As-Syakirin KLCC - Menara ExxonMobil - Menara Permata Sapura - Petronas Digital Collaboration Center • Sime Darby Plantation • SPIRIT Aerosystems Malaysia Agriculture and Horticulture Project and Repair Maintenance Hotels • KL International Airport (KUL) • Bintulu Airport (BTU) • Miri Airport (MYY) • Sibu Airport (SBW) Istanbul Sabiha Gökçen International Airport (SAW) 41.0 mppa 100% shareholding Four locations in and around KUL and SAW: • KLIA Terminal 1 landside • KLIA Terminal 1 airside • KLIA Terminal 2 airside • SAW landside Our Value Creation Strategy Our Performance Our Governance Additional Information 9 Kudat (KUD)
Our Investment Case Our Leadership Statement ANNUAL REPORT 2023 10 CORPORATE INFORMATION BOARD OF DIRECTORS Tan Sri Datuk Zainun Ali (Chairman) (Non-Independent Non-Executive) Dato’ Zamzuri Abdul Aziz (Non-Independent Non-Executive) Dato’ Normah Osman (Non-Independent Non-Executive) Datuk Amran Hafiz Affifudin (Non-Independent Non-Executive) Rohaya Mohammad Yusof (Non-Independent Non-Executive) Dato’ Ir. Mohamad Husin (Senior Independent Non-Executive) Ramanathan Sathiamutty (Independent Non-Executive) Cheryl Khor Hui Peng (Independent Non-Executive) Dato’ Seri Ir. Koe Peng Kang (Independent Non-Executive) Chris Chia Woon Liat (Independent Non-Executive) Mohd Nizam Mohd Khir (Non-Independent Non-Executive) (Alternate Director to Dato’ Zamzuri Abdul Aziz) REGISTERED OFFICE Malaysia Airports Corporate Office Persiaran Korporat KLIA 64000 KLIA, Sepang Selangor Darul Ehsan Tel : 603-8777 7011 Fax : 603-8777 7512 E-mail : zawardi@malaysiaairports.com.my SHARE REGISTRAR Securities Services (Holdings) Sdn Bhd Level 7, Menara Milenium Jalan Damanlela Pusat Bandar Damansara Damansara Heights 50490 Kuala Lumpur Tel : 603-2084 9000 Fax : 603-2094 9940/2095 0292 WEBSITE www.malaysiaairports.com.my BOARD PROCUREMENT COMMITTEE Dato’ Ir. Mohamad Husin (Chairman) (Senior Independent Non-Executive) Dato’ Zamzuri Abdul Aziz (Non-Independent Non-Executive) Dato’ Normah Osman (Non-Independent Non-Executive) Ramanathan Sathiamutty (Independent Non-Executive) Mohd Nizam Mohd Khir (Non-Independent Non-Executive) (Alternate Director to Dato’ Zamzuri Abdul Aziz) BOARD SUSTAINABILITY COMMITTEE Rohaya Mohammad Yusof (Chairman) (Non-Independent Non-Executive) Cheryl Khor Hui Peng (Independent Non-Executive) Dato’ Seri Ir. Koe Peng Kang (Independent Non-Executive) BOARD DEVELOPMENT COMMITTEE Dato’ Seri Ir. Koe Peng Kang (Chairman) (Independent Non-Executive) Dato’ Zamzuri Abdul Aziz (Non-Independent Non-Executive) Dato’ Normah Osman (Non-Independent Non-Executive) Dato’ Ir. Mohamad Husin (Senior Independent Non-Executive) Chris Chia Woon Liat (Independent Non-Executive) Mohd Nizam Mohd Khir (Non-Independent Non-Executive) (Alternate Director to Dato’ Zamzuri Abdul Aziz) ACTING GROUP CHIEF EXECUTIVE OFFICER/ GROUP CHIEF FINANCIAL OFFICER Mohamed Rastam Shahrom AUDITORS Messrs. Ernst & Young PLT Level 23A, Menara Milenium Jalan Damanlela Pusat Bandar Damansara 50490 Kuala Lumpur Tel : 603-7495 8000 Fax : 603-2095 9076/78 PRINCIPAL BANKERS Malayan Banking Berhad HSBC Bank Malaysia Berhad RHB Bank Berhad STOCK EXCHANGE LISTING Listed on Main Market of Bursa Malaysia Securities Berhad Listing Date : 30 November 1999 Stock Name : AIRPORT Stock Code : 5014 Stock Sector : Transportation & Logistics GROUP COMPANY SECRETARY Zawardi Salleh SSM Practicing Certificate No. 202008003088 MAICSA 7026210 BOARD RISK MANAGEMENT COMMITTEE Ramanathan Sathiamutty (Chairman) (Independent Non-Executive) Rohaya Mohammad Yusof (Non-Independent Non-Executive) Dato’ Ir. Mohamad Husin (Senior Independent Non-Executive) Cheryl Khor Hui Peng (Independent Non-Executive) BOARD AUDIT COMMITTEE Cheryl Khor Hui Peng (Chairman) (Independent Non-Executive) Datuk Amran Hafiz Affifudin (Non-Independent Non-Executive) Dato’ Ir. Mohamad Husin (Senior Independent Non-Executive) Dato’ Seri Ir. Koe Peng Kang (Independent Non-Executive) BOARD NOMINATION AND REMUNERATION COMMITTEE Dato’ Ir. Mohamad Husin (Chairman) (Senior Independent Non-Executive) Datuk Amran Hafiz Affifudin (Non-Independent Non-Executive) Ramanathan Sathiamutty (Independent Non-Executive) Cheryl Khor Hui Peng (Independent Non-Executive)
Our Value Creation Strategy Our Performance Our Governance Additional Information 11 Segi Astana Sdn Bhd 30% Airport Cooling Energy Supply Sdn Bhd 23% İstanbul Sabiha Gökçen Uluslararası Havalimanı Yatırım Yapım ve İşletme A.Ş. 20% SGC Havalimanı İşletmeleri Ticaret ve Turizm A.Ş. 20% CORPORATE STRUCTURE Alibaba KLIA Aeropolis Sdn Bhd 30% İstanbul Sabiha Gökçen Uluslararası Havalimanı Yatırım Yapım ve İşletme A.Ş. 40% SGC Havalimanı İşletmeleri Ticaret ve Turizm A.Ş. 40% Kuala Lumpur Aviation Fuelling System Sdn Bhd 20% Cooling Energy Supply Sdn Bhd 30% Malaysia Airports Consultancy Services Middle East LLC 49% Malaysia Airports (Sepang) Sdn Bhd Malaysia Airports Sdn Bhd Malaysia Airports Holdings Berhad Malaysia Airports Consultancy Services Sdn Bhd Malaysia International Aerospace Centre Sdn Bhd Malaysia Airports Capital Berhad KLIA Aeropolis Sdn Bhd Malaysia Airports (Niaga) Sdn Bhd Malaysia Airports Cities Sdn Bhd Malaysia Airports International Sdn Bhd MA Elogistics Sdn Bhd MAHB (Mauritius) Private Limited Malaysia Airports (Labuan) Private Limited Malaysia Airports (Properties) Sdn Bhd Airport Ventures Sdn Bhd Malaysia Airports (Subang) Sdn Bhd MFMA Development Sdn Bhd 30% Eraman (Malaysia) Sdn Bhd 100% Urusan Teknologi Wawasan Sdn Bhd 100% K.L. Airport Hotel Sdn Bhd 100% MAB Agriculture-Horticulture Sdn Bhd 100% İstanbul Sabiha Gökçen Uluslararası Havalimanı Yatırım Yapım ve İşletme A.Ş. 40% SGC Havalimanı İşletmeleri Ticaret ve Turizm A.Ş. 40% Malaysia Airports Technologies Sdn Bhd 100% BP Malaysia Airports Subang Aerotech Sdn Bhd 100% Malaysia Airports MSC Sdn Bhd 100% BPMA HS Sdn Bhd 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Our Investment case Our Leadership Statement ANNUAL REPORT 2023 12 In 2023, Malaysia Airports made 'Reimagining Passenger Experience' our core strategic focus and launched a comprehensive programme to improve and modernise our terminal identity, look and feel, and design for greater efficiency and an enhanced passenger journey
Our Value Creation Strategy Our Performance Our Governance Additional Information 13
Our Investment case Our Leadership Statement ANNUAL REPORT 2023 14 CHAIRMAN’S STATEMENT A BREAKTHROUGH YEAR
Our Value Creation Strategy Our Performance Our Governance Additional Information 15 TAN SRI DATUK ZAINUN ALI Chairman Passenger movements for operations in Malaysia reached 77.8% of 2019 levels Passenger movements for operations in Türkiye was 4.5% of above 2019 levels CHAIRMAN’S STATEMENT Opportunity amidst challenges In 2023, the global economic environment was challenging due to tight monetary policies to address inflation. The monetary policy measures to manage inflation include interest rate hikes which had continued to dampen growth. As a result, global economic growth had slowed to 3.1% in 2023 compared to 3.5% in 2022. In Malaysia, the economy faced challenges, primarily weak external demand from the dampened global environment, manpower shortages which impacted commodity production and higher cost of living. Nevertheless, the Malaysian economy expanded by 3.7% in 2023 compared to 8.7% in 2022, according to Bank Negara Malaysia. The continued recovery of tourism activities continued to be one of the key drivers of economic growth in Malaysia, with 20.1 million tourist arrivals in Malaysia in 2023, which was double that of 2022, but still 22.8% lower than pre-pandemic levels in 2019. In Türkiye, despite facing severe inflation, the economy grew by 4.5% in 2023, compared to 5.5% in 2022. In 2023, there was continued evidence of strong pent up demand globally for air travel post-pandemic, and the reopening of China’s borders for international travel in early 2023 provided an extra boost. Passenger traffic in Malaysia showed robust growth to reach 77.8% of 2019 levels in 2023 while at our airport in Türkiye, Istanbul Sabiha Gökçen International Airport (IATA Code: SAW), passenger traffic had exceeded 2019’s levels by 4.5%. “2023 was a breakthrough year for Malaysia Airports. Making progress on all fronts, we capped the year with a profit after tax that exceeded that of 2019, and set the Group on a focused growth trajectory. In early 2024, we inked new Operating Agreements with the Government of Malaysia which affirm Malaysia Airports’ continued role of operating, managing, maintaining and developing the 39 airports and STOLports in Malaysia for the next 45 years until 2069. Through a capital return mechanism in the new agreements, Malaysia Airports will have the flexibility to strategically invest in airport development and modernisation, and alleviate the financial burden on the Government.”
Our Investment case Our Leadership Statement ANNUAL REPORT 2023 16 CHAIRMAN’S STATEMENT An inflection point At the beginning of 2023, despite challenging global and domestic economic conditions, the aviation sector was in the midst of a remarkable recovery. Malaysia Airports was at an inflection point – the Group was fresh from the announcement that we had returned to profitability for 2022 following the pandemic, but to build on the momentum in the evolving operating environment, we knew that it was imperative not just to maintain competitiveness but also to enhance it and to sustain and grow usage of our airports and services. We also acknowledged that what had worked well in the past to lead us to success may not suffice to propel us forward in the dynamic landscape. Malaysia Airports therefore faced a watershed test of our capabilities – to create and capture opportunities in an otherwise challenging economic environment globally as well as in the countries in which we operate. While the indicators pointed to robust growth in air traffic and travel, reimagining the passenger experience and ensuring competitiveness in the face of increased traffic are critical steps in maintaining and growing market share in the aviation sector. To compound the complexity of the challenges, the Group was embarking on multi-year projects to replace critical assets at our main hub, KL International Airport (IATA Code: KUL) which had reached the end of their lifespan, namely the Aerotrain and the Baggage Handling System. It was time to tap into our resilience and adaptability – traits of our organisation which had served us well during the pandemic – and build upon our strengths. I am proud that our people rose to the occasion and met the challenges head on. The Group embarked on a journey to reimagine the passenger experience at our airports, and optimise operational efficiency to ensure that our airports are able to accommodate growing traffic without compromising service quality. We were focused, tenacious and unrelentless in our efforts. In a nutshell, collectively, we turned 2023 into a breakthrough year for Malaysia Airports, and moved from post-pandemic recovery to set our course firmly on a growth trajectory. I am therefore pleased to share with stakeholders how Malaysia Airports shifted the Group’s priorities and strategy towards expansion and development, leveraged on long-standing relationships with stakeholders and achieved stellar results this year.
Our Value Creation Strategy Our Performance Our Governance Additional Information 17 CHAIRMAN’S STATEMENT 3-Year Strategic Plan (2024 - 2026) Following on from that, there were several strategic measures that the Board had put in place. Chief among them was formulating a strategic plan for a three-year period spanning 2024 to 2026, centred on the overarching theme ‘reimagining the passenger experience’. The strategic plan outlines the Group’s focus on elevating the passenger experience and enhancing flight connectivity across our airport network, while delivering unparalleled convenience, choice and comfort by rejuvenating our commercial and retail offerings. It also addresses accelerating the Group’s off-terminal development business, the expansion of Penang International Airport (IATA Code: PEN), strengthening our international business primarily at SAW, our commitment to building a sustainable business and the Group’s focus on execution. Building a solid growth trajectory With all indicators pointing at air traffic growth in the short to medium term, the Group recognised the need to build on our foundations for sustained expansion. At the starting point of our journey was a simple premise – prioritise passengers as they play a pivotal role in shaping our ability to deliver value for stakeholders. Our Strategy Reimagining Passenger Experience PEN Terminal Expansion Project Enhancing Airline and Hub Connectivity Focusing on Execution Rejuvenating Commercial and Retail Commitment to ESG Accelerating Off-Terminal Opportunities Strengthening International Business A workforce united by a common purpose One of the keys to the success of the Group’s strategic focus was the alignment of our corporate goals with the Group's identity framework to foster a common purpose that unites our workforce. Complementing our Vision, Brand Promise and Core Values, we emphasised the significance of our people’s collective role in moving the Group forward through a Purpose Statement – ‘To create delightful experiences through great airport ecosystems, great people, great service, and great operations’.
Our Investment case Our Leadership Statement ANNUAL REPORT 2023 18 Environmental stewardship Malaysia Airports also underscored its commitment towards building a sustainable business, by launching the Group’s journey towards Net Zero Carbon Emissions by 2050. The commitment is supported by the Group’s Environmental Masterplan 2.0 which outlines the progression of the Group over a long-term roadmap towards a net zero carbon future in line with Malaysia’s long-term pledge to become a net zero greenhouse gas emissions nation at by 2050. Our stakeholders will already see some of our work in progress in terms of environmental stewardship as Malaysia Airports increases the adoption of renewable energy, primarily solar power, by installing photovoltaic solar panels on the rooftops of airport terminals and other buildings. Anchored by sustainability principles Recognising that the Group’s business operates within an ecosystem with interdependencies among stakeholders, Malaysia Airports has always maintained its commitment towards building a sustainable business that creates long term value for stakeholders. To amplify the Group’s vision ‘A Global Airport Group that Champions Connectivity and Sustainability’, the Board in 2023 formed a Board Sustainability Committee to oversee the Group’s commitments in Environmental, Social and Governance (ESG) matters and to provide a forum for more in-depth discussion on incorporating sustainability considerations throughout our business. CHAIRMAN’S STATEMENT Currently we are proud that the Group’s solar power capacity is approximately 22.5 MWp from solar projects across six airports, including KUL, which reduces Scope 2 carbon emissions by 15%. Under the Environmental Masterplan 2.0, the Group will rapidly increase its use of renewable energy including converting available land within the vicinity of KUL to house a solar farm. We also took a collaborative approach to work with members of the airport ecosystem to strengthen existing partnerships and open up new avenues for growth and innovation. An example of this was the Group’s collaboration with Malaysia Aviation Group, which we proudly unveiled the nation's inaugural Electric Ground Support Equipment (e-GSE) infrastructure. This groundbreaking initiative marks a significant stride in our collective efforts to mitigate carbon emissions and noise pollution in the aviation industry. Transitioning from conventional diesel-powered Ground Power Units to state-of-the-art Electric Ground Power Units yields remarkable benefits, in terms of reduced carbon emissions and lower noise levels. This pioneering initiative underscores our commitment to sustainability and our dedication to advancing eco-friendly practices by partnering with stakeholders within the aviation sector. Making positive human impact In the social sphere, Malaysia Airports is committed to bringing a positive human impact through our operations. In this regard, we constantly examine how our business can positively impact our employees’ development, wellbeing and safety, promote diversity, champion human rights and enrich the communities in which we operate. Despite aviation being a traditionally male-centric industry, I am proud of the diversity of the Malaysia Airports workforce. At Board-level, for our holding company in Malaysia, at the end of 2023, the Board had 40% female directors, with each bringing a wealth of experience and expertise to the table. In our operations in Türkiye, one-third of the board of İstanbul Sabiha Gökçen Uluslararası Havalimanı Yatırım Yapım ve İşletme A.Ş. comprises female directors. Across the Group, approximately onethird of our employees are female.
Our Value Creation Strategy Our Performance Our Governance Additional Information Employee learning and development stands as a cornerstone of our social objectives, aligning closely with the Group's commitment to fostering an inspiring workplace environment and nurturing the holistic growth of our employees, both professionally and personally. In 2023, our focus on learning and development took centre stage, particularly within our operations in Malaysia. We witnessed a significant uptick in the average training hours per employee, soaring by 45.7% YoY to clock 51 hours per employee, compared to 35 hours per employee in 2022. Empowering our employees with the tools, resources, and opportunities needed to thrive in an ever-evolving landscape is a catalyst for the Group’s sustainable success and reinforcing our position as an employer of choice. In 2023, Malaysia Airports' community enrichment initiatives as part of the #MYAirportCARES programme, benefitted 3,343 individuals across Malaysia. These initiatives encompassed a variety of impact-driven programmes that brought together our employees and other members of the airport community to make a positive impact on the communities we serve. One such initiative, the MYAirportCARES School Airport Tour, aimed to inspire young aviation enthusiasts through immersive airport tours. Throughout the year, the Group facilitated visits for over 1,800 students from 40 primary and secondary schools, offering them a behind-the-scenes look at airport operations and to learn first hand from our employees and members of the airport community across 21 airports in Malaysia. We also support the educational journey of B40 students residing near our airports. Through our efforts, we provided school uniforms and essential back-to-school supplies to 300 students, ensuring they could begin the new academic year with confidence and enthusiasm. In collaboration with the MyKasih Foundation, we extended assistance to an additional 300 needy students by funding their necessities through MyKasih student smartcards that enable students to purchase essential items such as food, beverages, books, and stationery from school canteens and bookstores. Lending a helping hand To alleviate the suffering of communities devastated by humanitarian crises, Malaysia Airports stepped up to contribute towards the humanitarian relief efforts. Following the devastating earthquake in southeast Türkiye in February 2023, SAW was used as a rescue and logistics hub for rescue personnel and relief efforts, as well as a crisis management centre. Our colleagues at the airport stepped up to provide all necessary support and assistance including food and drink for the relief workers. The Group, together with SAW and our employees, donated approximately EUR5.0 million for humanitarian relief to the Disaster and Emergency Management Authority of Türkiye (AFAD) and Turk Kızılay (Turkish Red Crescent). Upholding governance and integrity Malaysia Airports remains steadfast in its commitment to fostering robust corporate governance practices, underpinned by a culture of integrity and transparency across the Group. We recognise that good corporate governance serves as the cornerstone guiding our strategic direction, decisionmaking processes, and accountability. Ultimately, a culture of governance and integrity enables the Group to continue to deliver sustainable long-term value to our stakeholders. This Annual Report encapsulates our dedication to upholding exemplary corporate governance standards. It includes a comprehensive Corporate Governance Overview Statement pages 208 to 250 and a detailed Statement on Risk Management and Internal Control pages 255 to 261. Furthermore, within the Material Matters section of this report, stakeholders will find highlights on the Group’s progress in ‘Integrity and Anti-Corruption’ and ‘Regulatory Compliance’ pages 73 and 71. These sections provide insight into our ongoing efforts to uphold the highest standards of governance and ethical conduct throughout our operations. The Group's Board of Directors and Management have also reiterated their unwavering commitment to upholding a corruption-free workplace, in the presence of senior members of the Malaysian Anti-Corruption Commission. As part of this commitment, the Corruption-Free pledge is also delivered online to all employees within the Group, which they digitally sign to affirm their accountability and dedication to maintaining a corruption-free environment. In addition to the digital pledge, the Group conducts both online and in-person briefings on anti-bribery and corruption matters. In 2023, 99.65% of employees completed these briefings, underscoring the widespread understanding and commitment to combating corruption within the organisation. CHAIRMAN’S STATEMENT 19
Our Investment case Our Leadership Statement ANNUAL REPORT 2023 20 Revenue from airport operations which combines both aeronautical and non-aeronautical revenue increased significantly by 60.6% YoY to RM4,598.9 million, due to higher passenger movements, in particular international passengers. Results I am pleased to share with stakeholders that in this breakthrough year, Malaysia Airports produced stellar results in its key focus areas. Across all airports in our network the Group recorded a total of 119.5 million passenger movements or approximately 84.6% of 2019’s record high. This was also the first time we passed the 100 million threshold since the pandemic. For our operations in Türkiye, passenger movements for SAW exceeded 2019 levels by 4.5% to register 37.6 million passenger movements, a new record for the airport. Malaysia operations recorded a Profit Before Tax and Zakat (PBT) of RM384.6 million, a significant turnaround compared to the Loss Before Tax of RM263.2 million in FY2022. Our operations in Türkiye recorded its second year of profits with PBT of RM113.1 million, with four profitable quarters throughout FY2023. To cap our stellar performance in FY2023, in terms of net profit, although overall passenger movements fell short of pre-pandemic levels, Malaysia Airports’ net profit of RM543.2 million for FY2023 exceeded our 2019’s numbers by 1.15%. In February 2024, the Board approved a single-tier final dividend of 10.80 sen per ordinary share for FY2023. As such the total dividend payout for FY2023 is RM180.2 million based on the number of ordinary shares issued at the end of FY2023. This is in line with the Group’s dividend policy to distribute a dividend payout of at least 50% of the consolidated annual net profit after taxation and minority interest annually, subject to availability of distributable reserves. For the financial year ended 31 December 2023 (FY2023), Malaysia Airports recorded revenue of RM4,914.2 million, 57.2% higher year-on-year (YoY). CHAIRMAN’S STATEMENT
Our Value Creation Strategy Our Performance Our Governance Additional Information 21 The support and approvals from the Government at Federal, State and local levels with regards to our development plans, particularly for the expansion of Penang International Airport, the KLIA Aeropolis and the Subang Airport Regeneration Plan, is also recognition of the role of Malaysia Airports in generating long-term value for stakeholders through our initiatives. In addition, the support of the Government of Türkiye and government agencies has been evident in their support for the expansion of SAW in the completion of the airport’s second runway in 2023 as well as agreeing to invoke the force majeure provisions which reduced the Group’s financial burden from the pandemic. We are also greatly encouraged by the support from shareholders. When the Group declared its dividends for FY2022, we offered shareholders a dividend reinvestment plan that enables them to receive dividends in the form of the Group’s shares in lieu of cash. This offer was taken up by the vast majority of shareholders resulting in an 87.5% subscription rate for shares under the dividend reinvestment plan. Over the course of the year, the Group’s foreign shareholding has increased by over six percentage points. This increased support is an indication of the higher optimism on the Group’s recovery and growth prospects. Recognition from stakeholders We are pleased that our efforts received encouragement, support and recognition from our stakeholders. In particular, we are proud of the recognition from the Government of Malaysia and its trust in Malaysia Airports as demonstrated by the signing of the Operating Agreements in March 2024 under which the Group will continue to operate, manage, maintain and develop the network of 39 airports and STOLports for the next 45 years until February 2069. In addition, the Operating Agreements provide for favourable commercial terms and a transparent investment return mechanism which give Malaysia Airports the flexibility to pursue strategic investments which are essential to enhance airport capacity, facilities and infrastructure to elevate overall service standards. We are also proud to be recognised by human capital specialists as an employer of choice. In particular, we were singled out by GRADUAN, HRD Corporation and Talentbank in their rankings and awards for human capital practices. This is a recognition of our efforts in nurturing talent and developing our people as well as our ability to provide an exciting and fulfilling career path for our people. In addition, our efforts to provide a high quality of service to passengers continue to be recognised. In Airports Council International's annual Airport Service Quality survey for 2023, KUL was ranked 9th and Langkawi International Airport (IATA Code: LGK) clinched the top spot in their respective categories. This is the third consecutive year that KUL has been placed in the top 10, and that LGK has topped its category. CHAIRMAN’S STATEMENT
Our Investment case Our Leadership Statement ANNUAL REPORT 2023 22 Outlook In terms of economic outlook, the International Monetary Fund (IMF) forecasts the global GDP is projected to grow at 3.1% in 2024 from 3.0% in 2023, on the account of greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China. Meanwhile, Bank Negara Malaysia expects Malaysia’s GDP to grow between 4% - 5% in 2024, driven by resilient domestic demand and expenditure and the expected recovery in exports from improved external demand. Tourism is a key economic sector that is expected to improve further while the progress of multi-year infrastructure projects and the implementation of catalytic initiatives will also drive domestic growth. The IMF also expects Türkiye’s GDP growth to moderate from 4.0% in 2023 to 3.1% in 2024, supported by expansionary fiscal policies, increase in net minimum wage as well as the reconstruction efforts in earthquake zones with large multiplier effects. In terms of industry outlook, IATA estimates the global passenger traffic to recover to 99% of 2019 levels in 2024 driven by the accelerated recovery following the reopening of Chinese market in January, increase in domestic air travel from strong pent-up demand as well as the effects of early opening and robust domestic demand in North America. Over a longer horizon (2019 - 2040), global passenger traffic is expected to grow with an annual increase of 3.4%. Traffic in Asia Pacific is expected to recover to 94% of 2019 levels in 2023 and exceed pre-pandemic levels in 2024 (110%), as the gradual ramp-up of airline operations and return of tourism are poised to drive further growth. Despite being the only region to reach its pre-pandemic passenger levels in 2024, Asia Pacific is likely to see the most rapid growth in passenger traffic with an annual increase of 4.5% in the number of passengers between 2019 and 2040, at which point the region is expected to make up more than half of global passenger demand. CHAIRMAN’S STATEMENT Meanwhile, traffic in Europe is expected to remain resilient and continue its strong momentum to reach 2019 levels and 110% in 2024, and continue to steadily grow with an annual increase of 2.2% between 2019 and 2040. Additionally, the Malaysian Aviation Commission (MAVCOM) anticipates passenger traffic for Malaysia to reach between 93.9 million and 107.1 million passengers in 2024, reflecting a growth of 10.0% to 25.0% over 2023. This forecast signifies a recovery of up to 98% of 2019 levels due to domestic and international travel to China and the ASEAN region. This optimism in passenger recovery and growth trajectory is essential for Malaysia Airports to catalyse financial stability, foster further innovation, enhance competitiveness and further fuel performance and sustainable growth.
Our Value Creation Strategy Our Performance Our Governance Additional Information 23 Thank you I would like to extend a warm welcome back to Dato’ Zamzuri Abdul Aziz and his alternative, Encik Mohd Nizam Mohd Khir, who rejoined the Board on 5 June 2023, as well as Datuk Amran Hafiz Affifudin, Dato’ Seri Ir. Koe Peng Kang and Mr Chris Chia Woon Liat who joined the Board on 1 September 2023, 12 December 2023 and 11 March 2024 respectively. The Board would also like to thank our former members, Tan Sri Mohamad Salim Fateh Din, Datuk Azailiza Mohd Ahad, Datuk Johan Mahmood Merican and Ms Wong Shu Hsien who resigned in 2023, as well as our former Managing Director, Dato' Sri Iskandar Mizal Mahmood. On behalf of the Board, I would like to record our appreciation for their service and contribution towards the Group. Furthermore, the Board extends its heartfelt gratitude to our dedicated employees who have tirelessly served the Group with unwavering commitment throughout the year. We recognise and appreciate the numerous sacrifices they have made in fulfilling their responsibilities, and we are immensely grateful for their steadfast support. We also extend our sincere appreciation to our shareholders and all other stakeholders, including various ministries, government agencies, airline partners, retail partners, vendors and other business partners, for their invaluable support and contributions in navigating the challenges and seizing the opportunities of 2023. As we embark on the journey into 2024, we do so with renewed confidence in our capabilities to generate value for our stakeholders. We are poised to embrace new opportunities for growth and development while ensuring the sustainability of our hard-earned achievements in transforming the Group. As custodians of the nation's gateways, we remain committed to creating long-term value for our stakeholders as we continue to build and nurture a sustainable business for the future. TAN SRI DATUK ZAINUN ALI Chairman CHAIRMAN’S STATEMENT
Our Investment case Our Leadership Statement ANNUAL REPORT 2023 24 For those who need some peace and quiet before their journey, there are numerous lounge options for you. Rest, relax, and recharge, or perhaps catch up on work to get your journey off to a great start
Our Value Creation Strategy Our Performance Our Governance Additional Information 25
Our Investment case Our Leadership Statement ANNUAL REPORT 2023 26 GROUP CHIEF EXECUTIVE OFFICER’S MESSAGE “In a breakthrough year for Malaysia Airports, we resolved that our core strategic focus would be to delight passengers and reimagine their journey through our airports. Working in tandem with key airport stakeholders to enhance the passenger experience, we achieved several major milestones in our corporate journey. We take pride that our efforts in 2023 culminated in one of the most profitable years in the history of Malaysia Airports.” A BREAKTHROUGH YEAR YIELDS STELLAR RESULTS Mohamed Rastam Shahrom Acting Group Chief Executive Officer
Our Value Creation Strategy Our Performance Our Governance Additional Information 27 Malaysia Airports began 2023 with renewed energy, having posted a significant turnaround to return to profitability in 2022. With the pandemic serving as a catalyst for urgent transformation of the aviation industry, Malaysia Airports had embarked on a Group-wide effort to put in place the building blocks for a sustainable business that creates long-term value for stakeholders. In 2023 therefore, the Group completed its transition from recovery to growth, amply demonstrating its multifaceted capabilities as a custodian of strategic national infrastructure, coupled with the nimbleness to capitalise on revenue generating opportunities. As the operator of international gateways including the crown jewels, KL International Airport (IATA Code: KUL), and Istanbul’s city airport, Istanbul Sabiha Gökçen International Airport (IATA Code: SAW) in Türkiye, we have a full agenda in growing the market share of our airports while ensuring that passengers and other stakeholders continue to be well served. Nevertheless, one thing remains constant – we must always put our passengers first and foremost at the very top of our agenda. GROUP CHIEF EXECUTIVE OFFICER’S MESSAGE 119.5 million passenger movements in 2023 which was 84.6% of 2019’s all-time high RM543.2 million profit after tax in 2023 The theme for this year’s annual report, ‘A Breakthrough Year’, encapsulates our efforts to transform the passenger journey through our airports. Through numerous iterations, we refined processes, empowered our people through training, leveraged on technology, and explored avenues to enhance the overall passenger experience. As our airports operate within an ecosystem, it was crucial for us to engage with other stakeholders and present them with a compelling value proposition to harness the synergies inherent in a collaborative approach. which was 1.15% higher than 2019 Therefore, with passenger experience as key in everything that we do, we have refocused the Group’s strategic growth plan on delighting our passengers as the foundation for creating long-term value for the Group and its stakeholders.
Our Investment case Our Leadership Statement ANNUAL REPORT 2023 28 Our efforts enabled us to celebrate several key milestones in this landmark year. The Group recorded a total of 119.5 million passenger movements or approximately 84.6% of the all-time high in 2023. This was also the first time we passed the 100 million threshold since 2019. In our operations in Türkiye, passenger movements for SAW shot past 2019 levels by 4.5% to register 37.6 million passenger movements, a new record for the airport. Although overall passenger movements were still short of pre-pandemic levels, for the financial year ended 31 December 2023 (FY2023), Malaysia Airports’ net profit surged past our 2019 numbers by 1.15% to RM543.2 million. This achievement signaled one of the most profitable years for Malaysia Airports since the inception. The Group also declared a final dividend of 10.80 sen per share for FY2023. In recognition of the Group’s consistent financial performance, Malaysia Airports was honoured with The Edge Billion Ringgit Club award in 2023 for the ‘Highest Return to Shareholders over Three Years’ for the Transportation and Logistics sector. The award is testament to our prudent management, consistent performance as well as our resilience and agility, given the volatility of the operating environment over the threeyear period. We are proud that our transformative efforts have been recognised by the Government of Malaysia with the signing of the Operating Agreements in March 2024 entrusting the Group with the continued role of operating, managing and maintaining, 39 airports and STOLports for the next 45 years until February 2069. In addition, the Operating Agreements also provide for favourable commercial terms and a transparent investment return mechanism which give Malaysia Airports the flexibility to pursue strategic investments which are essential to enhance airport capacity, facilities and infrastructure to elevate overall service standards, thereby expanding Malaysia Airports' role beyond being a pure airport operator, to an airport developer. I am pleased to share with Malaysia Airports’ shareholders the highlights of this breakthrough year, our achievements and the challenges we overcame in creating value for shareholders, and our strategies for future growth and development. ACI accreditation for customer experience In tandem with the increase in passenger movements, it was crucial to ensure the passenger experience at our main hub at KUL continued to adhere to international best practices and standards. Hence, in early 2023, Malaysia Airports embarked on the Airport Customer Experience Accreditation (ACEA) programme, an initiative of Airports Council International (ACI) World that builds airports’ long-term capacity to enhance customer experience management. By the end of 2023, KUL had made significant progress, with ACI accrediting our airport at Level 2 of the ACEA programme’s five levels, reflecting the airport’s success in orchestrating a seamless passenger-centric journey to enhance customer satisfaction. The accreditation also signifies Malaysia Airports’ focus on continuous improvement of customer experience and services in line with international standards. Airport Service Quality recognition for KUL and LGK Our efforts at KUL were also recognised in passenger feedback, resulting in a score of 4.99 out of a possible 5.00 points in ACI World’s Airport Service Quality (ASQ) programme, the globally recognised initiative that provides ACI member airports with tools and expertise to measure and improve passenger satisfaction, business performance and airport service quality. Langkawi International Airport (IATA Code: LGK) scored a perfect score of 5.00 in the same programme. With these scores, KUL was tied 9th in the ASQ rankings for airports in Asia Pacific with capacity of over 40 million passengers per annum (mppa) while LGK secured the top spot for airports with capacity of 2-5 mppa, a testament to our ability to maintain passenger satisfaction despite the increase in passenger movements in the year. GROUP CHIEF EXECUTIVE OFFICER’S MESSAGE An elevated passenger experience Our core strategic focus for 2023 was reimagining the passenger journey through our airports and elevating their experience by enhancing convenience, comfort and connectivity.
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