KUCHING: Analysts’ sentiments range from neutral to mildly positive on the recent announcement that the government will waiver visa fees for tourists from China to stimulate tourists arrivals.
“We are of the opinion that those proactive measures announced by the government are Rakyat-friendly but neutral to the aviation industry,” the research arm of TA Securities Holdings Bhd (TA Securities) said in a recent report.
It highlighted that already reeling from the decline in passenger traffic volume as evidenced by Malaysia Airports Holdings’ (MAHB) monthly traffic data, the announcement of tourism promotion by the government through competitive domestic airfares will provide a strong boost to air travel demand.
“To reduce domestic air fares, a more direct and effective way is to reduce the airfares charged by Malaysian Airline System Bhd (MAS) and Firefly, which will influence other local operators (AirAsia Bhd and Malindo) to follow suit,” it suggested.
As far as earnings impact is concerned, TA Securities believed that airline companies, which have been benefitting from lower jet fuel price, have the flexibility to adjust the airfares lower to stimulate the demand.
“As such, we do not think reducing airfares will deal a serious blow to their earnings,” it opined.
Aside from that, it noted that the government may consider reducing the airport tax for domestic travelers, who are currently paying RM9 and RM6 for departure at KLIA and KLIA2 respectively.
“However, it may add on some pressures to the proposed reduction in government’s operating expenditure in 2015. Be that as it may, the impact to MAHB’s earnings is also muted as the government will have to compensate MAHB for the tax reductions,” TA Securities said.
In a separate note, RHB Research Sdn Bhd (RHB Research) viewed the visa fee waiver as mildly positive for the aviation sector.
“As of the first nine months of 2014 (9M14), MAHB recorded both year-on-year and year to date (YTD) declines in average visitor spending, as a result of a decrease in China tourist arrivals, who are big duty free spenders.
“As Chinese tourist numbers could rebound, this would bode well for its earnings recovery in 2015,” it said.
RHB Research expected AirAsia X Bhd to benefit from then recovery in Chinese passenger arrivals, which would also benefit AirAsia Bhd, given the passenger feed the carrier could generate.
Nevertheless, it noted its concern of travel agents and holiday tour operators which could ignore this waiver and charge their customers visa fees anyway, making this new measure pointless.
“For example, even though Thailand implemented a fee waiver in August to October 2014, a significant proportion of tour operators were still charging customers visa fees,” it said.
Meanwhile, it noted that while waiving visas would be a more effective measure, the government also believes this could put national security at risk.
As such, a waiver of just visa fees would be a measure that is better controlled.
“Visa applicants could potentially save an average of RM50 per application. Unfortunately, there were no other details as to which other passport holders would benefit from the fee waiver as well,” the research arm said.