Malaysia’s passenger movements are steadily recovering as airlines address fleet shortages caused by supply chain and maintenance, repair, and overhaul challenges. MAHB’s local airports saw 6.8m passenger movements in Oct-23, marking an 80% recovery (domestic: 80%, international: 79%). The equal contribution of 50% from both the international and domestic sectors to total passenger movements indicates a return to the pre-pandemic ratio.
MIDF said the international seat capacity grew by +3.3%yoy in Oct-23, with a load factor of 74.9% (+0.2%mom). Northeast Asia experienced the highest growth in passenger movements at +12.2%mom. Despite incomplete recovery, China’s Golden Week (October 1-7, 2023) contributed to a +33.0% increase in passenger movements compared to the same period in Sep-23. Notably, Japan, Pakistan, Taiwan, and Turkey recorded the highest passenger movements in Oct-23. Meanwhile, the domestic sector achieved the second-highest average load factor to date at 81.5%, despite airlines offering seat capacity at 69% of pre-pandemic levels. This was partially attributed to the recent suspension of MyAirline.
The anticipated reciprocal visa-free entry agreement between China and Malaysia, effective December 1, 2023, is expected to boost traffic in this sector, contingent on a simultaneous increase in seat capacity between the two countries, which is presently at about 50% of pre-Covid levels. Furthermore, Malaysia has also decided to unilaterally extend a similar arrangement to India and the Middle East. Additionally, traffic numbers in 4QCY23 will receive additional support from the gradual full fleet reactivation of Malaysia AirAsia (MAA), scheduled for completion in Dec-23.
The passenger traffic projections remain unchanged, aligning well at 75% of our full-year estimate in 10MCY23, with an anticipated stronger performance in Dec-23. expectation is an 85% recovery this year (domestic: 90%, international: 80%). The house said it maintains NEUTRAL on the aviation sector with NEUTRAL calls on both MAHB (TP: RM7.45) and Capital A (TP: RM0.90).
However, there is an upside bias for the former, attributed to the strong international traffic at Istanbul SGIA and the anticipated full recovery of commercial revenue in FY24F.
