KUCHING: The outlook for Malaysian aviation players in 2014 remains bleak with no yield recovery in sight.
According to RHB Research Institute Sdn Bhd (RHB Research), Malaysian Airline System Bhd’s (MAS) airfare dumping strategy in financial year 2013 (FY13) widely deteriorated yields for the whole sector, dropping by 10 to 18 per cent year on year (y-o-y) in the fourth quarter of 2013 (4Q13).
“The downside in yields in Malaysia were more than what we saw in Thailand, where yields contracted by five to 10 per cent y-o-y.
“None of the carriers there undertook massive fare damping activity, which cushioned the yields downside,” it revealed.
The weakening ringgit against the US dollar also saw higher costs incurred on US dollar-denominated expenses.
“With the ringgit expected to be persistently weaker, this will give further risk on cost increases, which will more than offset the impactfrom higher US dollar-denominated revenue churned,” RHB Research forewarned.
All these added back to a challenging yields outlook ahead for airlines, with emphasis on cost cuts.
There appears to be no change MAS’ and AirAsia X’s FY14 strategy, which is continuing to expand their capacity aggressively by 10 per cent and 48 per cent respectively.
This will put further risk on yields moving forward.
On the other hand, AirAsia is scaling back its aircraft deliveries asit restructures its routes, bringing FY14 capacity growth down to eight per cent.
As such, the firm believed this year will remain challenging for yields, according to most airlines.
“The way to outperform peers is by a carrier’s own cost-cutting efforts and we see AirAsia scoring highly in this category,” it predicted.