"With Malindo likely operating a reduced fleet going forward, it stands to reason that the main loser will be Malaysia Airports Holdings Bhd (MAHB) via lower Malaysian passenger traffic and the main winner will be AirAsia Group Bhd via higher Malaysia AirAsia average fares," said Maybank Investment Bank Research in a note.
In efforts to scale down its Malaysian operations, Malindo, which is part of Indonesia's Lion Air Group, has reduced its fleet from a high of 42 aircraft to 18 aircraft today. Since 1Q20, Malindo has transferred 17 aircraft to its sister Indonesian carriers, returned five aircraft to lessors and stored one aircraft.
According to Maybank IB, Malaysian carriers now operate 233 aircraft or 10% less than the high of 260 aircraft in 2019.
Starting next year, Malindo will take delivery of 10 B737 MAXs but Malaysia Airlines will dispose of six A380s, which would mean the number of aircraft carriers in 2022 will remain lower relative to 2019.
The impact of Malindo's smaller fleet will be in contrast to what happened in 1Q13 when the carrier commenced operations in Malaysia. At the time, the other Malaysian carriers reacted by acquiring or leasing more aircraft, increasing capacity and cutting fares.
According to Maybank IB, the main winner was MAHB as its Malaysian passenger traffic surged 24% between FY12 and FY14. The main loser was AirAsia as its Malaysian operations' average fare fell 10% during the same period.
This time around, Maybank IB expects AirAsia to benefit from higher average fares, although it noted also that higher fuel costs may offset the upside.
The research firm, however, noted that this scenario will not come to fruition in the event Malindo's sister carriers in Indonesia return its 17 aircraft, although this will be unlikely.
It noted that Indonesian national carrier Garuda Indonesia recently announced that it will dispose or return to lessors a whopping 71 aircraft, 17 of which will be B737-800s. Of the aircraft Malindo transferred to its sister carriers, 15 of them were B737-800s.
"We gather that it is wiser for Lion Air to retain the aforementioned 15 B737-800s in Indonesia to fill the vacuum left by Garuda Indonesia rather than return them to Malindo in Malaysia to duke it out with other Malaysian carriers," said Maybank IB.
At this juncture, the brokerage has maintained its "hold" call on MAHB with a target price of RM6.86 and a "sell" call on AirAsia with a target price of 36 sen.