International Passenger Boon For Aviation Players

Malaysia Airports Holdings Berhad’s network of airports in Malaysia collectively recorded 5.8m passenger movements in Feb-23. This translates into a recovery of 71% (domestic: 80%, international: 62%). More than 112,000 average daily passengers travelled domestically – a level similar to Jan-23 despite it being a shorter month, driven by the year-end school holidays which began on February 17.

Meanwhile, the international segment saw its average daily passengers grow by +4.0%mom mainly contributed by the Northeast Asia sector (China, South Korea, and Japan). Ramping up capacities for the land of the dragon. The China sector,
which historically contributed about 10% of the total traffic in CY19, is still in the early stage of recovery in tandem with the gradual reinstatement of capacities by airlines. The passenger movements for this sector grew by +61%mom in the month under review. On the local front, AirAsia plans to recover 90% of pre-pandemic capacity (~290 weekly flights) by Aug-23 and grow it by +11% (~363 weekly flights) relative to 2019 level by Nov-23, while its sister airline, AirAsia X Malaysia has just returned to the China market after reinstating flights to Shanghai, Hangzhou and Chengdu in Mar-23.

Research house MIDF says the steady improvement in the higher-yielding international passenger mix should be favourable for the aviation players. The local airlines will continue to be supported by narrowing jet fuel crack spread as the refinery capacities recover, the expectation of a stronger MYR against USD this year, and airfares being rationally priced. More routes should be reinstated and introduced in the coming months as airlines reinstate their capacities. Meanwhile, the traffic from the Indonesian market – which contributed ~20% of the total traffic in CY19 – should improve on the back of TransNusa Airlines’ entry into the Malaysian market starting from Apr-23.

The call for the section remains NEUTRAL with no revisions made to the passenger traffic assumptions as the house said it believes they are on track to meet the full-year projection. Relative to 2019 levels, MIDF said it expects a traffic recovery of 85% in CY23 (domestic: 90%, international 80%). Potential upsides to the projections include local airlines rebuilding their fleet and faster than-expected return of Chinese tourists

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