Tay expected passenger traffic growth in 2018 to continue to benefit from stablisation of the operating environment for MAHB's unit, Sabiha Gokcen International Airport .
KUALA LUMPUR: Moody's Investors Service has affirmed the A3 issuer rating of Malaysia Airports Holdings Bhd
(MAHB) and changed its outlook to stable from negative.
A Moody's vice president and senior credit officer Ray Tay said the change in outlook to stable “reflects the strengthening of MAHB's credit profile due to stabilisation in its overseas operations, and continued resilience in its domestic market.
Tay expected passenger traffic growth in 2018 to continue to benefit from stablisation of the operating environment for MAHB's unit, Sabiha Gokcen International Airport (SGIA, unrated), which owns and operates the second largest airport in Istanbul, Turkey (Ba1 negative).
“These operations had faced uncertainty following the failed coup attempt of July 2016, as well as the occurrence of terrorist attacks,” he said.
Tay said the stable outlook was also supported by its expectation of continued robust traffic growth in Malaysia, especially for the higher yielding international passenger segment, which grew at 14.1% in 2017.
Moody's base case scenario conservatively assumes mid-single digit growth in total passengers for 2018 and 2019 for the Malaysian operations, the key earnings contributor for MAHB.
“Such growth assumption supports resilience in MAHB's credit profile should actual traffic growth taper off compared to the robust growth seen in 2017,” he said.
Tay said as for SGIA, although the 5.6% growth recorded for 2017 was lower than before the 2016 coup attempt, he expected mid-single digit growth to continue in the next one to two years.
“We expect growth in 2018 to continue to be led by international passengers, who pay a much higher passenger service charge than that for domestic passengers,” he said.
The regulatory framework for MAHB is evolving, given the ongoing negotiations regarding the extension of the Operating Agreement (OA) with the Malaysian government, and uncertainty around tariff determinations.
Moody's expects the process to be protracted, given the complexity of the issues involved, and will evaluate the credit impact as more details become available.
Nevertheless, the uncertainty around the process is a credit challenge, it noted.
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