Prospects for aviation looks bright coming into 2018

KUCHING: The prospect for looks bright coming into 2018, despite the challenges such as rising fuel prices, analysts observed.

In a report, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said the prospect for aviation sector looks bright coming into 2018.

“Despite the challenges such as rising fuel prices, we believe airlines like AirAsia Bhd (AirAsia) and AirAsia X Bhd (AAX) to remain buoyant, underpinned by its continuous improvement in operational cost coupled with aggressive capacity expansion,” it said in a report yesterday.

It pointed out that better competitive environment is expected to lead to a more rational pricing regime, increasing airlines average yield.

For airports, the research team expected the growth of passengers’ traffic to remain in positive territory, driven by higher international passengers.

“Overall, this is positive for Airports Holdings Bhd (MAHB) benefitting from these encouraging developments such as net addition of aircraft and higher utilisation rates by airlines,” it opined.

Considering that travel demand is expected to remain robust in 2018, the research team said it continued to favour MAHB as a proxy to Malaysia’s resilient inbound/outbound travel industry being the largest airport operator in Malaysia.

“We think that MAHB will able to see the annual traffic number to surpass the psychological 100 million within two years, while only forecasting a relatively conservative growth of four per cent,” it explained.

On the airport operator’s performance in December, MIDF Research pointed out that MAHB saw its highest passenger traffic recorded in the 2017 (FY17) in December.

“As the traffic snapshot came in to conclude 2017 numbers, MAHB saw its passenger movement moved up by 7.8 per cent year-on-year (y-o-y), accounting for a total of 127.9 million.

“In December alone, the airport operator recorded nine million passengers, the highest since December 2016. The positive deviation was largely steered by international passengers, recorded at 59.7 million.

“This was an increase of 13.1 per cent y-o-y in comparison to domestic traffic growth at 3.5 per cent y-o-y.

“We view the upbeat demand for international air travels in 2017, was primarily due to visa relaxation for and India tourists.

“Considering the visa-free programme to continue in 2018, we believe the international traffic numbers will again see contribution in traffic numbers by , India and Southeast Asia sectors,” it projected, noting that passengers from the aforementioned countries and region make up 75 per cent of MAHB’s international traffic.

Meanwhie, it noted that the average load factor for international sector hit an all-time high of 77 per cent, despite international aircraft movements staging double-digit growth of 12.8 per cent.

“Given these positive trend, we opine the demand for international sector will remain strong, providing additional head room for airlines companies to grow. The improved load factors were mainly driven by the low cost carriers (LCC), AirAsia and AAX, both added significant seat capacities but yet still able to maintain load factors at above 80 per cent.

“We believe LCCs such as AirAsia and AAX will continue to benefit from this trend, leveraging on its network of airlines operators in the South East region along with its low-cost business model.

“We view the pent-up demand for international air travels will place AirAsia and AAX at a significant advantage over its competitors, given the companies’ aggressive expansionary initiatives in the regional and international routes coupled with its inventive strategies of driving cost lower,” it opined.

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Source: Borneo Post Online

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