Aviation Sector Update: Passenger Traffic Recovery Progresses with International Demand Surge
Malaysia’s aviation industry continues to show signs of recovery, approaching pre-pandemic levels in passenger traffic. September 2024 saw a significant rebound, with total traffic recovering to 95% of 2019 levels. Key contributors to this resurgence are the robust performances in the China and India markets, along with the entrance of five new airlines that have added capacity and frequency to international routes.
Passenger Traffic Reaches Milestones
In September 2024, Malaysia recorded a 95% recovery rate in passenger traffic, with international routes performing exceptionally well, recovering 99% of pre-pandemic levels. Domestic traffic, however, continues to lag at 90%, reflecting ongoing challenges within the local travel market, possibly due to aircraft availability limitations. The third quarter of 2024 maintained a strong recovery rate at 92%, driven by public holidays, a school break, and major sporting events like SUKMA in Sarawak.
The introduction of new airlines such as 9 Air, Air India, and AirAsia Cambodia, along with 197 additional weekly flight frequencies, played a crucial role in pushing up international traffic. Notably, Subang Airport benefited from new services by Scoot Tiger, which launched daily flights in September.
Passenger Traffic Reaches Milestones
A key highlight for the aviation sector is the full recovery of the non-ASEAN market. In September, the sector surpassed pre-pandemic levels, growing by 1.0% compared to September 2019. China and India have emerged as pivotal markets for Malaysian aviation. Traffic from Mainland China in the third quarter saw a significant boost, with flight frequencies up by 24.8% compared to 2019 levels. The India sector, which has shown a 90% recovery, is also experiencing robust latent demand for travel.
Outlook and Investment Recommendations
Passenger traffic for the first nine months of 2024 reached 71% of the year’s target, in line with expectations. The fourth quarter is typically the busiest period, which suggests that Malaysia’s full-year target of 94% recovery is achievable. While MAVCOM has slightly downgraded its full-year projection to 97.6 million passengers, industry expectations remain optimistic, with a forecasted growth of 4.0% in 2025 compared to 2019 levels.
On the investment front, there are mixed recommendations. Investors are advised to accept the offer for Malaysia Airports Holdings Berhad (MAHB) at RM11.00 per share, and a BUY recommendation is maintained for Capital A with a target price of RM1.06. However, potential risks to a complete recovery include delays in AirAsia Malaysia’s fleet reactivation and disruptions in aircraft deliveries, which could hamper domestic recovery.
Aviation sector on track
The Malaysian aviation sector is on track to reach near-full recovery by the end of 2024, with international markets, particularly China and India, leading the rebound. However, the domestic sector remains a challenge due to supply-side issues, which could impact the overall recovery. Despite some risks, the sector shows promise, particularly as airlines prioritize international routes with higher demand and profitability.
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Source: MIDF