While Malaysia’s aviation sector is not expected to recover to its pre-pandemic state in 2021, analysts project that the industry could see a real turning point in 2022 with pent-up demand to propel the recovery of traffic volume. — Bernama photo
KUCHING: While Malaysia’s aviation sector is not expected to recover to its pre-pandemic state in 2021, analysts project that the industry could see a real turning point in 2022.
In a report, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) said: “Despite our pessimism for 20211, we project a real turning point for aviation players in 2022.
“We postulate pent-up demand of air travels will propel the recovery of traffic volume. Return to normalcy will sustain the recovery forward to reach peak of pre-pandemic, in 2019, albeit it will take a few years.”
On other hand, it noted that MAVCOM took a slightly positive stance on passenger traffic.
“Based on report published report end of 2020, MAVCOM estimated that passenger traffic to grow by between 94.2 per cent y-o-y and 100.3 per cent y-o-y, translating to 51.7 million to 53.3 million passengers attributable to the low base effect in 2020,” it added.
Overall, on the aviation industry’s outlook, MIDF Research pointed out that there are several critical challenges that still requires scrutiny and level-headed thinking.
It noted that these key challenges facing aviation sectors are border controls, travel restrictions and quarantine measures, consumer and government confidence, and financial viability.
“Reopening borders and easing of travel restrictions are key for the return of air passengers. Pre-pandemic, Malaysia’s passenger was split almost equally between domestic and international passengers. Without one or the another, there will be only fractional recovery and aviation players will still be in the red.
“Therefore, the pertinent question is how much longer the border controls and travel restrictions will be in place?” MIDF Research highlighted.
It noted that Malaysia’s health director general Tan Sri Dr Noor Hisham had said that the reopening of borders could be considered once 70 per cent of the population have been vaccinated.
“If the statement holds true, it certainly put a dampener on recovery outlook of the sector. Given that Malaysian government target for 80 per cent inoculation by December 2021, the 70 per cent benchmark might only be feasible on the tail end of 2021.
“This highlights the lower-than-expected rebound for air passengers in 2021. Furthermore, without upliftment of travels limitation, there is fair chance that the industry will see similar or even lower passenger volumes than last year, potentially turning the year of recovery to another washout year,” MIDF Research said.
Another key consideration on the aviation industry’s performance is the consumers’ confidence.
“Our stance is that safety is the paramount driver for sustainable recovery. Without it, demand for air travel will remain low, at least, not to the level that is sufficient to save the industry from further losses.
“Key considerations to our assumption are on the timing of vaccines procurements, and of course successful and impactful administration of vaccines in large scale. We believe these two circumstances will predate a sustainable and meaningful recovery of air travel demand,” it said.
Given that the timeline for recovery may take longer than 2021 and 2022, MIDF Research noted that the staying power of aviation players are now put into questions as financial muscles are necessary to ride out the current tough period.
Nevertheless, it pointed out that both aviation players under its coverage, Malaysia Airports Holding Bhd (MAHB) and AirAsia Group Bhd (AirAsia) have taken necessary measures to cut costs and raise cash to stay afloat.
All in, MIDF Research retained its ‘neutral’ view on the sector.
It said: “We foresee that air travel demand will recover meaningfully, however, only at a portion of pre-pandemic level for 2021. With vaccines introduction and subsequent administrations are in the horizon, we believe that there is a light at the end of the tunnel for aviation players.
“This is compared to during the height of pandemic, with rising cases globally; we cannot foresee hope of remedy. Currently, with positive development on the vaccine fronts, the recovery narrative can be gauge with better clarity. Furthermore, with governments and businesses are more adept on managing the pitfalls of the virus, we believe punitive measures that hinder air travel will soon will gradually eased and potentially lifted (such as travel bubbles between countries, universal screening for air travelers, and others).”