KUALA LUMPUR (Oct 13): Maybank IB Research has maintained its “positive” stance on the Malaysian aviation sector and said Capital A Bhd stands to benefit the most via higher fares, following MYAirline Sdn Bhd abruptly suspending its flight operations.
In a note on Thursday (Oct 12), the research house said that by its estimation, Malaysia Airport Holdings Bhd (MAHB) could be mildly negatively impacted on fewer passengers and a potential provision for doubtful debts, while AirAsia X Bhd (AAX) would not be impacted at all.
On MAHB, Maybank IB expects the airport operator to be mildly negatively impacted.
It said MYAirline accounted for less than 10% of MAHB’s Malaysia domestic passenger traffic and less than 2% of revenue and estimates, considering domestic passenger service charges (PSCs) are 5x-7x lower than that of international PSCs.
“There are also amounts outstanding to it from MYAirline but MAHB assures us that any provision will not have a material impact (i.e. less than 5%) on earnings.
“On AAX, we do not expect it to be affected at all. MYAirline was operating narrow body Airbus A320s that fly to domestic and Asean destinations. AAX operates wide body Airbus A330s that fly to destinations beyond Asean (except Bali),” it said.
Maybank IB said MYAirline competes directly with Capital A’s 100% owned Malaysia AirAsia (MAA), which historically contributes more than 80% to group earnings.
“Coupled with the delayed delivery of narrow body Boeing B737 MAX 8s to Malaysia Airlines (Not Listed), the industry’s domestic capacity will take time to return to 100% of 2019 (pre-pandemic) levels (Maybank Investment Banking Group estimate: 80%-90% currently).
“This will exert upward pressure on fares.
“Moreover, the timing of MYAirlines’ suspension is at the start of the year-end travelling period. Fares tend to peak in 4Q, which may mean a bumper 4Q2023 for Capital A. All else being equal, every RM1 higher than average MAA fare will accrete RM25 million-RM30 million to group earnings,” it said.
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