What is the outlook for Malaysia Airports Holdings Bhd amid new competition?

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Outlook for Malaysia Airports Holdings Bhd Amid New Competition

Malaysia Airports Holdings Bhd (MAHB) is anticipated to benefit from increased passenger traffic volumes, driven by aggressive price competition likely to be sparked by the entry of a new ultra-low-cost carrier (ULCC), MYAirline Sdn Bhd. This heightened competition among airlines is expected to stimulate demand, leading to a faster recovery of passenger volumes for MAHB.
Increased Passenger Traffic Potential

The emergence of MYAirline, a newly established ULCC, is poised to intensify price wars within the Malaysian aviation sector. Airlines, including established players like AirAsia, Malaysia Airlines, Malindo, and Firefly, are expected to respond to this new competition by aggressively offering low promotional fares and redeploying capacity. This competitive environment is seen as highly beneficial for airport operators like MAHB, as lower ticket prices are a known stimulus for passenger demand, thereby accelerating the recovery of airport traffic figures.
Potential for Improved Profitability

Beyond the immediate impact of increased passenger numbers, MAHB's structural profitability may also see an uplift. The impending finalisation of a revised Operating Agreement (OA) with the government is identified as a potential catalyst for re-rating the company. While specific details of the revised OA are not elaborated upon, the prospect of improved profitability suggests a positive outlook for MAHB's financial performance.
Varied Traffic Recovery Forecasts

Forecasts for the recovery of air traffic vary among analysts. Maybank Investment Bank projects that domestic traffic will recover to 45 per cent of pre-Covid-19 levels this year, with international traffic reaching 20 per cent. However, Maybank suggests that a full recovery of domestic passenger traffic to 100 per cent of 2019 levels in the long term is unlikely, as Malaysian carriers are expected to operate fewer aircraft compared to the pre-pandemic era.
Impact of AirAsia X's Strategy

The strategic shift by AirAsia X towards a cargo-focused operation is noted as a factor that could impact MAHB's revenue streams. This pivot is expected to result in a loss of passenger service charges and reduced spending on duty-free items at MAHB's facilities. Maybank's longer-term assumptions indicate a recovery of AirAsia X's domestic and international passenger traffic to 100 per cent and 80 per cent of pre-Covid-19 levels, respectively.

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What is the outlook for Malaysia Airports Holdings Bhd amid new competition?

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