M’sian aviation industry to see smooth flying into 2015

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ROBUST OUTLOOK: Due to the new airport capacity and in part to the steadily expanding regional economy, local carriers and other ancillary firms are poised for continued growth in the coming decade.

KUCHING: Taking into account Malaysia’s growing popularity as a tourism destination and increasing importance as a centre for business and trade in Southeast Asia, the airlines and other air transport players are expecting to see continued development within the foreseeable future.

The most significant change expected in coming years would be the expansion of the Association of Southeast Asian Nation (Asean) aviation market, Malaysia Airports Holdings Bhd (MAHB) managing director Tan Sri Bashir Ahmad told Oxford Business Group in its report.

The objection of the agreement was to remove restrictons, on gradual basis, to the operation of air services in order to build a single unified aviatoin market among Asean member countries by 2015.

“While some member countries have been slow or have delayed liberisation, Malaysian government continues its policy of openness, having recently relaxed air services agreements with Brunei and Singapore,” he pointed out.

“Additionally, the introduction of the Asean single aviation market by 2015 will increase point-to-point traffic throughout the region, helping regional airports as well as smaller airports in Malaysia,” he added.

Liberalisation has also brought about increased services from other airlines, such as Lion Air, Tiger Airways and Jetstar, which created more options and competitive fares for passengers and enhanced growth in new sectors.

“This has provided us with the impetus to hone our competitive edge so that we can continue to provide for and attract customers to regional airports,” said Bashir.

That said, the segment would still face a number of challenges, OBG stated.

“Under the new policy, Malaysia will face competition from a number of other major regional air transport hubs – including Singapore and Thailand – both of which have been investing heavily in their airports and airlines for years.

“Historically, deregulation in a market such as Asean, which currently has excess capacity in terms of air transport, has resulted in rapid consolidation,” it added.

With this challenges in mind, a new terminal is currently under construction at KLIA which would replace the existing low-cost carrier terminal (LCCT) and the new KLIA2 was expected to bump capacity to 70 million passengers annually, from around 43 million currently.

Due to the new capacity and in part to steady expanding regional economy local carriers and other ancillary income, firms were poised for continued growth in the coming decade.

“AirAsia Bhd, particular, has been adding new destinations on a regular basis over the past few years, and plan to continue to expand throughout 2013. MAS, meanwhile, has been cutting a number of long-haul routes in order to focus on regional destinations,” said the research firm.

Going forward, the regional demand for air travel in Southeast Asia would be strong, fuelled by the rising incomes of countries and also the increasing Asean trade.

“A burgeoning middle class in China and India, in particular, bodes well for the expansion of Malaysian’s tourism industry in the coming years and with this in mind, the air transport segment is preparing for continued growth,” OBG highlighted.

By numbers, passenger travel accounted for the majority of activity in the sector.

In 2011, passenger traffic at KLIA reached 37.7 million, an increased of 16 per cent from 34.1 million the previous year, according to MAHB. This was up substantially on early 2011 government estimated of seven per cent growth for the year.

In the first half of 2012 (1H12), the airport welcomed 19.3 million passengers, up 4.8 per cent from 18.4 million in 1H11.

“Visitor arrivals during the 2H12 were expected to be up slightly over 1H, primarily as a result of an anticipated increase in the number of passengers arriving from Middle Eastern countries in August 2012,” OBG highlighted.

Total traffic at all of MAHB’s 39 airports reached 32.6 million in 1H12, an increase of 4.2 per cent from 31.2 million in 1H11. Its international traffic at all airports increased by 5.1 per cent, while domestic traveller figures grew by 3.5 per cent in the same period.

OBG further pointed out that the jump in international passengers during this period was primarily the result of a 12.4 per cent increase in aircraft movements by foreign airlines at MAHB airports in the first six months of the year, in addition to an 8.7 per cent increase in AirAsia aircraft movements.

While passenger traffic increased, the air cargo segment registered a decline of 0.5 per cent in 1H12, falling from 437,600 tonnes to 435,500 tonnes. This decline was primarily a reflection of stagnant economies in Europe and other regions that are still suffering the effects of the international economic downturn, it added.

“With these ambitious plans, Malaysia’s domestic transport network is expected to continue to improve and expand for the foreseeable future, which would likely burnish the country’s growing reputation as major transport player in Southeast Asia,” it concluded.