Aviation sector shows greater operational efficiency

  • Business
  • Thursday, 27 Dec 2018

KUALA LUMPUR: Malaysia’s aviation industry has a fairly stable 2018 with airlines showing greater efficiency in operations but overall growth has been slowing down as the industry heads towards a matured phase.

Maybank Kim Eng analyst Mohsin Aziz said growth in passenger movement for this year was likely to be 2%, relatively lower than during the 17-year period in the country from 2000-2016, where growth was at almost 8% per annum on the back of cheap airfares and higher average flight per population.

In 2017, traffic improved 8.5% to 96.54 mil passengers from 88.98 million in 2016, the second highest increase in the last 20 years.

He said the current average age of Malaysians, with the population getting older and travelling less, also partly contributed to the slower growth this year.

“Ever since the MH370 (incident) in 2014, our growth has been slowing down a lot. So basically, our high growth phase is over already and now we are in the slower maturing growth.

“This is normal because we are already at the stage where we've travelled enough,” he told Bernama.

Commenting on the industry players, Mohsin said both the airlines and airport operator had become more efficient, with their balance sheets showing pretty stable financial results compared with volatile profits and losses previously.

In fact, utilisation of the entire aviation assets has also improved significantly with the load factor of airports and aircraft being quite full throughout January to December.

“Thanks to the gradual improvements (by industry players) over the years, we are closer to be a mature developed country.

“We are not there yet but we are on the last mile. So that is why you see all these improvements,” he elaborated.

To recap, the entire industry landscape this year was tested with a challenging economy and falling profitability in the corporate sector amid higher fuel spending as the oil price recovered and the foreign exchange turned volatile.

In the third quarter (Q3) ended Sept 30, 2018, Malaysia Airlines Bhd's (MAB) operating performance was affected by stiff competition, rising fuel prices and adverse foreign exchange movements, and this was further exacerbated by a crew shortage, especially in July and August.

Group chief executive officer (CEO) Izham Ismail described the period as “challenging” with the airline recording a lower passenger yield of 21.5 sen against 22.6 sen in the same quarter last year.

The national airline carried 2.1% more passengers at 3.47 million during the reviewed quarter compared with 3.4 million a year ago.

Meanwhile, AirAsia Group Bhd's (AAG) operating profit in Q3 2018 was nearly halved to RM253mil against RM494 mil in the same period last year, its lowest since the quarter ended June 2015, due to higher fuel costs as crude oil surged 50.1% to US$95 per barrel.

Net profit, however, surged about 81% to RM915.9mil, mainly due to one-off gains from the sale of its stake in AAE Travel Pte Ltd to Expedia and the reversal of deferred tax liabilities arising from aircraft disposals.

As for Malaysia Airports Holdings Bhd (MAHB), net profit doubled to RM168.49mil in Q3 2018 from RM80.93mil a year earlier, prompted by higher passenger growth for Malaysia and growth momentum in Turkey, while revenue improved to RM1.23bil from RM1.21bil previously.

Among major issues for this year was the never-ending spat between MAHB and AAG, this time over the RM23 additional passenger service charge (PSC) that the airline refused to collect as it viewed that the extra tax would burden the travelling public by making them pay more for “below par” services.

AAG CEO Tan Sri Tony Fernandes slammed the Malaysian Aviation Commission (Mavcom) and MAHB for not looking at all possible solutions for PSCs and adopting a one-size-fits-all approach.

He believed the calculation mechanism was “not fair” as the passengers would be charged the same airport tax for the Kuala Lumpur International Airport (KLIA) and KLIA2 although the facilities and services are of completely different levels.

This has resulted in a combined RM36.1mil lawsuit by MAHB's subsidiary Malaysia Airports (Sepang) Sdn Bhd against AAG's unit AirAsia Bhd (AAB) and its long-haul affiliate AirAsia X Bhd for outstanding airport taxes.

Another major development in the industry was the massive internal reorganisation and the transfer of the listing status of AAB to the new holding company AAG, which was completed in April.

The exercise unified AAB's various regional affiliates under one holding company, providing the group with further cost reduction through streamlining group cost structure while taking out the complexity and duplication in its operations.

Another issue was when MAB's full subsidiary FlyFirefly Sdn Bhd, which operates as Firefly, took a hit from the unresolved issue between the Civil Aviation Authority of Malaysia and Singapore Seletar Airport, causing suspension of services to and from Singapore effective Dec 1, 2018.

Meanwhile, 2018 also saw quite a number of appointments and removals in the top management due to either internal reorganisation or changes in the government administration. In February, Malaysia Aviation Group (MAG) appointed Ahmad Luqman Mohd Azmi as the new chief operations officer (COO) of MAB, replacing Izham Ismail who was promoted as group CEO.

MAG also named Philip See as Firefly's new CEO, replacing Ignatius Ong who joined MAB as group chief revenue officer in June 2018, as well as Ibrahim Mohamed Salleh as CEO of MABKargo. — Bernama


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