KUALA LUMPUR: The impact of departure levy will be negated by robust air travel demand heading into Visit Malaysia Year 2020 (VMY2020), MIDF Research said.
The firm Malaysia still has the lowest departure levy for economy class passengers for both Asean and non-Asean destinations, and premium class passengers for Asean destinations in comparison with other countries such as Hong Kong, Bangkok and Australia.
“The international departure levy came into effect on September 1, 2019. As this was only applicable for tickets purchased on or after the implementation date, the effects of the departure levy may have yet to be felt,” MIDF Research said.
The firm maintained a “positive” recommendation on the aviation sector, following the downward revision of the passenger service charge (PSC) for international departures beyond Asean to RM50 (previously RM73) for airports excluding the main terminal Kuala Lumpur International Airport (KLIA), effective October 1.
“This could undermine the efforts of implementing the Regulated Asset Base (RAB) framework from January 2020,” it added.
MIDF Research said the government had been working closely with the Malaysian Aviation Commission to ensure the new PSC rates from January 2020 would be reflective of the service levels of respective airports under the RAB framework.
The lower PSC for beyond Asean destinations in airports ex-KLIA would spur traffic growth especially for LCCs such as AirAsia Group Bhd (for routes in China and India) and AirAsia X Bhd between now and the of implementation of new aeronautical charges in January 2020, it added.
The firm said the prospect of travel demand remains upbeat coming into seasonally strong in the fourth-quarter of 2019 and approaching VMY2020.
“Therefore, we strongly believe that Malaysia Airports Holdings Bhd (MAHB) passenger numbers for Malaysian operations can surpass the 100 million mark in 2019, while maintaining a relatively conservative growth rate of 3.5 per cent at about 102.5 million passengers.”
MIDF Research kept a “buy” call on MAHB with a target price of RM9.43 per share.
Meanwhile, MAHB network of airports, including Istanbul Sabiha Gokcen International Airport's (Istanbul SGIA), recorded 11.5 million passenger movements in September, a 6.2 per cent growth over the same month last year.
International passenger movements recorded 5.4 million passenger movements with a year-on-year (YoY) increase of 6.9 per cent, while domestic passenger movements increased by 5.6 per cent recording 6.1 million passenger movements compared to September 2018.
On a last-12-month basis, the total MAHB network of airports grew 4.5 per cent with 138.2 million passengers, the highest traffic handled over a 12-month period by the network.
Overall aircraft movements increased by 3.2 per cent with international and domestic aircraft movements recording an increase of 4.6 per cent and 2.3 per cent respectively over September 2018.
Locally, airports in Malaysia registered 8.4 million passenger movements in September 2019, a 7.6 per cent YoY growth over September 2018.
International sector recorded 4.1 million passenger movements with a 3.6 per cent increase while domestic sector recorded 4.2 million passengers, an increase of 11.9 per cent.
In view of the optimism and positive average load factors for the period, MAHB expects to achieve the budgeted 2019 traffic numbers.
“The domestic traffic correction and consolidation is expected to continue at least until first quarter 2020 while the international sector could see further improvement.”
The airport operator said challenges and uncertainties continue to remain with respect to airlines performance, competition in the domestic environment as well as the local and global macro-economic outlook.