On May-23, Malaysia’s passenger figures of 6.8m pax exceeded 80% of pre-pandemic levels for the first time. The overall traffic recovery reached an impressive 86% (domestic: 99%, international: 74%). The growth in international traffic was fueled by rising travel to Indonesia, South Korea, and China, while the domestic sector’s recovery was driven by the extended Raya festive season, multiple public holidays, and the Langkawi International Maritime & Aerospace (LIMA) Exhibition. Additionally, the increased movement of Haj pilgrims from domestic airports to KLIA played a significant role, with this year’s pilgrim quota raised to 31,600 (CY22: 14,306).
Excluding seasonal influences, the full recovery of passenger traffic was hindered by a capacity gap mainly resulting from lower aircraft availability. New airline MYAirline sets its sights on tripling its fleet size this year, major local airlines do not have immediate intentions to aggressively rebuild its fleet as it focus on reactivating grounded aircraft and renewing its aging fleet. Therefore, the return of Malaysia AirAsia’s entire aircraft fleet is a crucial factor in driving the recovery, with the airline having less than two months to achieve this target.
MIDF is of view that the Malaysia’s total passenger traffic is expected to gather pace in 2HCY23. The non-ASEAN sector holds considerable growth prospects as more routes are reinstated and flight frequencies increase. MAHB expects the China sector’s seat capacity to reach at least 60% of the 2019 level by end-CY23, partly supported by the resumption of direct flights by China-based airlines. A relatively weaker MYR against USD poses near-term challenges for local airlines as it incurs substantial USDdenominated expenses, but our economists expect it to strengthen to USDMYR4.20 by year-end. Encouragingly, the jet fuel crack spread has stabilised within the USD10-15 per barrel range, and our internal forecast
suggests stable crude oil prices for the remainder of the year. With the continued implementation of fuel surcharges, we anticipate effective management of any potential fluctuations in jet fuel prices.
No revisions were made to our passenger traffic assumptions. The house expects a traffic recovery of 85% in CY23 (domestic: 90%, international: 80%). Potential upsides to the numbers are: (i) local airlines rebuilding their fleet and (ii) faster-than-expected return of Chinese tourists
