Festivities, seasonal holidays boon to aviation sector’s passenger traffic growth

KUCHING: The upcoming festivities as well as the worldwide summer holiday season are expected to drive the aviation sector’s passenger traffic growth in the second quarter of 2018 (2Q18), analysts observed.

In a report, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) pointed out that the worldwide summer holiday season usually starts between late-May and mid-June while the local public holiday of Aidilfitri is also expected to fall within 2Q18.

“Looking at 2QFY18, we are expecting passenger numbers to climb further on the premise of robust travel demand, due to worldwide summer holiday season which starts between late-May and mid-June. Also, it is noteworthy that major local public holiday of Aidilfitri is expected to fall in 2QFY18, boosting demand for domestic travel,” it opined.

In terms of capacity, while the Malaysian Aviation Commission (MAVCOM) has recently reported that several local airports are operating beyond its theoretical terminal design capacity, MIDF Research believed Malaysia Airports Holdings Bhd (MAHB), a proxy of Malaysia’s travel industry, has sufficient capacity to cater the growing passengers’ traffic in the local airports.

“This will be supported by MAHB’s various efforts lined up to improve its daily airport operational efficiencies including baggage flow, immigration queuing time and public amenities, which is expected to improve the ‘feel good factor’ of overall airport experience,” it added.

Overall, MIDF Research opined, “We view that the industry particularly operated by airports and low-cost carriers will sustain its positive momentum in 2QFY18 based on the encouraging trend of passengers traffic as well as aggressive capacity expansion by the likes of AirAsia Bhd (AirAsia) and AirAsiaX Bhd (AAX).”

It pointed out that despite the risks of rising fuel prices, it believed that both low cost short and medium-long haul business to remain buoyant, underpinned by its continuous improvement in operational cost.

“Better competitive environment is expected mainly in the domestic segments stemming from capacity withdrawal and the presence of major public holidays. Considering passengers were generally less sensitive to ticket price during holiday season, this will lead to stable yield,” it added.

Meanwhile, the research team at Kenanga Investment Bank Bhd (Kenanga Research) said that for for FY18, the Malaysian passenger traffic growth could be softer, with a growth of eight per cent compared to 8.5 per cent FY17.

It explained that this could be due to lower domestic seat capacities by airlines (Batik Air, MAB), and weaker currency advantage from stronger ringgit.

Nevertheless, it said, “We are optimistic on the recovery of Turkey and targeting a growth of 10 per cent for FY18.”

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