MAHB buoyed by rise in passenger volumes

PETALING JAYA: The proposed new operating agreement (OA) is seen as a game changer for Malaysia Airports Holdings Bhd (MAHB).

The aviation regulator recently gave conditional air service licences to two companies - Z9 Elite Sdn Bhd (MYAirline) and SKS Airways Sdn Bhd. Both are planning to launch their flights soon.

The entry of two new players will add up to the number of airlines in the country and it could result in ticket price competition which could stimulate air travel once again.

The current dominant variant – Omicron – is seen to be less deadly and it could herald the endemic stage of Covid-19. All these factors could help MAHB’s passenger volumes recover faster, said CGS-CIMB Research in a note.

It said an airline starting up during the pandemic with a clean balance sheet and access to ultralow-cost aircraft leases will likely ensure low operating costs and the ability to compete aggressively with incumbents for market share by offering sustainable low airfares.

It said AirAsia’s fleet grew last year despite the pandemic by absorbing its affiliates’ planes, and it will likely be eager to redeploy its fleet and retain its market share.

Similarly, Malaysia Airlines renegotiated its aircraft lease rates and is in a good position to compete, while Malindo Air is also considering bringing back its jet planes from Indonesia if demand in Malaysia warrants their return.

It believes the aggressive price competition will likely follow a surge in aircraft seat capacity in the post-pandemic period, which may stimulate passenger traffic volumes, with MAHB as the unequivocal winner.

The other re-rating catalyst for MAHB include the potential signing of the new OA with the government of Malaysia. This may result in an increase in aeronautical tariffs.

MAHB described the proposed new OA as a “gamechanger and catalyst” for itself. It believes the new OA will make specific provisions for an increase in net aeronautical charges for MAHB if and when it undertakes new capital expenditure with a view to fairly remunerate MAHB.

The house believes that with MAHB’s aeronautical charges among the lowest in the region, there may also be scope for a near-term, one-off step-up in charges.

It said if the OA is materalised his year, it could be another re-rating catalyst for MAHB.

It added that the Aeropolis development may also have its lease period set at 99 years, freeing it from the constraints of the airport concession, which ends in 2069.

CGS-CIMB has an “add’’ call for MAHB but has reduced the target price for it from RM7.45 to RM6.95 a share.

In December 2021, Malaysia’s total passenger traffic had recovered to 31.2% of the 2019 base, with international traffic remaining lackluster at 6.2%, but with domestic traffic staging a healthy recovery to the 57.7% level, it added.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

Next In Business News

Exports of articles of apparel and clothing accessories up 18.5% y-o-y to RM499.9mil
DNeX posts net profit of RM51.6mil in Q3
Hong Kong seeks to revive global banking status with major summit
Asia shares join global rebound on easing of Fed hike fears, China tech boost
Petronas Chemicals' 1Q net profit hits record of RM2.08bil
Malaysia's economy is expected to expand further after favourable performance in Q1 2022
Bintai Kinden swings to the black with FY22 net profit of RM4.6mil
FBM KLCI retraces earlier losses as Asia rallies
Short-selling in Power Root shares suspended after falling 15.98% to low of RM1.42
Australia dollar finally cracks resistance with help from robust data

Others Also Read