The Covid-19 outbreak is expected to lessen passenger movements and weaken the retail spending at MAHB’s Malaysian airports.
KUCHING: Recently released figures showed a strong end for Malaysia Airports Holdings Bhd (MAHB) in its financial year 2019 (FY19) from both domestic and international passenger segments.
Researchers with MIDF Amanah Investment Bank Bhd (MIDF Research) saw that MAHB’s normalised earnings for its full year FY19 surged more than 20 per cent. This comes after MAHB’s fourth quarter of FY19 recorded normalised earnings (after excluding one-off gains) of RM30.7 million.
This brings its FY19 normalised earnings to RM564.5 million.
“The positive performance for the year was mainly due to the better-than-expected passenger traffic growth in Malaysia of 6.1 per cent year on year (y-o-y),” it detailed in a note yesterday.
Domestic traffic grew faster than international traffic, MIDF Research added, as FY19 revenue rose by 7.4 per cent y-o-y.
This was in-line with the overall 5.6 per cent y-o-y growth of passengers’ traffic in both Malaysia and Turkey for the period.
“MAHB’s domestic traffic growth in Malaysia during FY19 of 9.5 per cent y-o-y outpaced its international traffic growth of three per cent y-o-y as airlines redirected more capacity to meet the domestic travel demand.
“The domestic traffic growth in Malaysia even rebounded from the previous low performance whereby the domestic passenger traffic has been experiencing a decline for more than a year prior to January 2019.”
MIDF Research went on to note that the international passenger segment continues to reach a record high.
“Although the international traffic did not grow as much as the domestic traffic FY19, the international passenger traffic in Malaysia of 53.3 million recorded was also the highest ever recorded on an annual basis in Malaysia,” it highlighted.
“Moreover, the international sector continued to retain more than 50 per cent of the passenger market share.
“Furthermore, considering the international average load factor at 77.1 per cent – being 4.3 percentage points higher than the domestic load factor – indicating the inherent demand for international travel remained resilient.”
This growth of international traffic was supported by the airlines’ additional frequencies, direct connectivity and also contribution by new routes that were not operated previously, MIDF Research said.
“For instance, Qatar Airways’ flights commenced flights from Doha to Langkawi in October 2019, part of MAHB’s hub-and-spoke model which aims to bring global traffic to smaller airports and vice versa.”
Looking ahead, Affin Hwang Investment Bank Bhd (AffinHwang Capital) expect the Covid-19 outbreak to lessen passenger movements and weaken the retail spending at MAHB’s Malaysian airports.
This comes as MAHB’s management shared that the passenger movements at its airports declined by 10 to 18 per cent during a certain period in February 2020.
“Also, the flights (to and from) North Asia will be cut by some 30 per cent. The lower passenger movements from the countries with relatively high spending power should, in turn, affect the retail spending at the airports,” it highlighted in a separate note.
With Covid-19 cases now spread outside of China such as Italy, South Korea, Japan and Iran, MIDF Research believe that this will exert additional downward pressure on passenger traffic growth in FY20 as capacity cuts by airlines worldwide are inevitable.
“Note that, passenger traffic from Europe, the Middle East, South Korea and Japan collectively make up around 15 per cent of the international passenger traffic in KLIA Main Terminal.
“Management even guided that February 2020 passenger traffic has dropped by 10 to 20 per cent y-o-y.
“Henceforth, we are revising our passenger traffic growth forecast to minus 2.5 per cent and 6.5 per cent y-o-y in FY20 and FY21 respectively.”
Elsewhere, AffinHwang Capital saw that MAHB was still in discussions with the government on the newly announced economic stimulus package, where the government said “MAHB will provide rebates on rental for premises at the airport as well as landing and parking charges”.
“Management is unable to confirm the amount of rebates to be offered, or whether the government will subsidise the rebates or discounts,” it added.
“Management shared that the group is still in discussions with the government (Ministry of Finance and Ministry of Transport) on the Operating Agreements and the Regulated Asset Base.
“Broadly, management is looking for methods (RAB or alternative framework) to govern the return on its future expansion/renovation capex. Management hopes to conclude these discussions by end-1Q20.”