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Aviation analysts have called on Malaysian airlines particularly to re-adjust their capacity, focusing on more domestic routes, Indian and Indonesian markets as well as rescheduling new aircraft delivery this year. NST pix by Ahmad Irham Mohd Noor
Aviation analysts have called on Malaysian airlines particularly to re-adjust their capacity, focusing on more domestic routes, Indian and Indonesian markets as well as rescheduling new aircraft delivery this year. NST pix by Ahmad Irham Mohd Noor

KUALA LUMPUR: The coronavirus shockwave has adversely affected Asia Pacific’s aviation and tourism sectors, after years of buoyant growth, industry observers said.

And they called on Malaysian airlines particularly to re-adjust their capacity, focusing on more domestic routes, Indian and Indonesian markets as well as rescheduling new aircraft delivery this year.

The observers said the move would be vital to cushion the impact of a steep collapse in air travel resulting from the coronavirus (Covid-19) outbreak.

IHS Markit said for years, the Asia Pacific (APAC) region had enjoyed buoyant growth driven by rapidly increasing Asian tourism and business travel.

The region became increasingly dependent on mainland Chinese tourism and business travel over the past decade, it added.

Total annual Chinese tourist visits to Thailand had risen from 2.7 million in 2012 to 11 million last year.

Chinese tourism has also become increasingly important for Japan’s tourism industry, with total Chinese tourist visits to Japan having reached 9.6 million in 2019, accounting for 30 per cent of total foreign tourist visits.

For Singapore, 3.4 million mainland Chinese tourists came to the republic in 2018, accounting for around 18 per cent of total international tourist visits.

The Covid-19 outbreak had become a black swan event for APAC commercial aviation industry due to certain travel ban imposed on mainland Chinese tourists, IHS Markit Asia-Pacific chief economist Rajiv Biswas said.

“The new restrictions on travel by visitors outbound from China combined with the collapse in demand for travel to China from other nations force many APAC airlines to temporarily cancel their flights to mainland Chinese cities until the novel coronavirus epidemic is contained,” he said.

Airlines in the region would likely face near-term economic difficulties attributable to deteriorating profit margins, while the coronavirus epidemic continues to disrupt air travel, Rajiv added.

“APAC governments are also facing increasing pressure to roll out stimulus measures to support their commercial aviation and tourism industries through this severe economic crisis,” he said.

Hong Leong Bank Investment Bank analyst Daniel Wong said airlines should focus more on markets with “less worry” of the outbreak, instead of emphasising on routes to China, as demand weakens.

“Although revenue is less lucrative, airlines must redeploy their aircraft to domestic and other markets. It is still a better way for them (airlines) to get something rather than nothing,” he told the New Straits Times yesterday.

He expects the recovery in air travel demand to materialise in the third-quarter of this year, citing that the outbreak had substantially affected demand particularly in China, Hong Kong and Singapore.

“Nevertheless, the recent drop in oil price has provided some cushion to the deteriorating margin and profitability,” he added.

TA Securities analyst Tan Kam Meng believes the local hospitality and aviation sectors earnings would be depressed in anticipation of lower foreign tourists spending, particularly from Chinese travellers.

“Malaysia Airports Holdings Bhd recorded 105.2 million passenger movements throughout its network of airports in Malaysia last year. Of the total, Chinese tourists accounted for 11 per cent passengers mainly at the Kuala Lumpur International Airport,” he said.

Tan said airlines should boost its marketing budget to instil travel confidence beyond Chinese travellers as people were fear of travelling.

“If the outbreak is contained, then travel sentiment will improve. However, if this outbreak continues until end-March, the local aviation and hospitality earnings will be affected in the first-quarter (Q1) of this year,” he added.

He expects AirAsia’s Malaysia operations to reduce its load factor by 3.0 percentage points to 1.24 million passengers for 2020, assuming the virus would not prolong in Q1.

“The decline in oil price and ringgit’s strengthening will support airlines’ earnings and cushion some impacts. However, additional aircraft delivery this year will cause a problem (excess capacity) for airlines as demand dampens,” he said.

Meanwhile, Malaysia Airlines Bhd (MAB) said it was still flying to China, despite the outbreak.

However, the airline said its flights would be guided by the advice of Foreign Affairs Ministry and Transport Ministry.

“At the same time, re-bookings, refunds and delay of travel to China are expected due to the outbreak of the virus,” an MAB spokesperson told the NST.

The national carrier said it would continue to monitor the trend and adjust its operations accordingly, while prioritising the safety of its passengers and crew.

Malaysia has yet to ban outbound travel from other parts of China, except to Hubei province, the epicentre of the outbreak.

However, Sabah and Sarawak had temporarily suspended all flights from China with immediate effect to prevent the spread of the novel virus.

Countries that have imposed stringent travel bans on visitors from China include Japan, Australia, India, Indonesia, New Zealand, the Philippines, Singapore and Vietnam.

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