KUALA LUMPUR, Jan 9 – Malaysia’s aviation sector is set for profitability in 2023 as passenger traffic continues to recover, with jet fuel prices easing and airfares remaining high, said Maybank Investment Bank Bhd (Maybank IB).
However, the investment bank has revised downward its projection on passenger (pax) traffic handled by Malaysia Airports Holdings Bhd (MAHB) to an average of 78 per cent of the pre-Covid level in 2023, with domestic at 85 per cent and international at 70 per cent due to the slower-than-expected return to service of AirAsia’s aircraft in Malaysia.
It had previously expected MAHB’s pax traffic to average 90 per cent of pre-COVID levels in 2023, with the domestic passenger traffic fully recovered and the international segment hitting 80 per cent of the pre-Covid level.
“In the long term, we expect domestic pax traffic to continue to be driven not just by the return to service of AirAsia Malaysia’s aircraft but also by the expansion of service by MYAirline.
“MYAirline aims to expand its fleet size to 50 in five years. Similarly, international pax traffic will continue to be driven not just by the return to service of AirAsia Malaysia aircraft but also by the return of foreign airlines to Malaysia,” Maybank IB said in a research note.
It believes that the airport operator would break even in the fourth quarter of 2022.
As for low-cost carrier Capital A Bhd, which operates AirAsia, Maybank IB expects the number of passengers to have continued recovering towards the end of last year, driven by the return to service of 140 aircraft compared with 103 at end of the third quarter of 2022.
“In 2023, we expect Capital A’s number of passengers to recover to 78 per cent of 2019 levels, driven by the return to service of its entire fleet of 200 aircraft by end-2023.
“We expect airfares to ease a tad as Capital A and its competitors reinstate capacity but on the expectation that the ringgit will trade at an average of RM4.50 against the US dollar and the jet fuel price averaging at US$110 per barrel, we expect Capital A to break even by the third quarter of 2023,” it added.
The investment bank reckons that the main challenge for the Malaysian aviation sector in 2023 is returning aircraft to service after being left idle during the COVID-19 pandemic.
There are currently backlogs at maintenance, repair, and operations centres around the world due to a surge in demand for aircraft to be returned to service, coupled with a lack of labour and parts, it noted.
Another catalyst for the Malaysian aviation sector in 2023 is the reopening of China’s borders which could add fuel to the recovery momentum.
However, Maybank IB does not expect many Chinese visitors to return to Malaysia in 2023 due to China still battling its Omicron wave, the requirement for negative PCR tests before returning to China; and AirAsia Malaysia not having returned all its aircraft to service yet.
“Going forward, we assume that Capital A’s AirAsia Malaysia and AirAsia Philippines will restore all their flights to China by 2024 but assume that MAHB’s Malaysian operations will welcome only 1.3 million Chinese visitors or two-thirds of pre-COVID levels in 2024.
“The latter is because Malaysia Airlines, Batik Air Malaysia, and AirAsia X all cut their fleet size during the COVID-19 pandemic. Thus, it will not be easy to fly the previous 2.0 million Chinese visitors from 2019 to Malaysia so soon,” it explained.
Maybank IB has maintained its “buy” recommendation on both MAHB and Capital A.
