13 March 2020
Malaysia Airports Holdings Bhd (MAHB) is starting to feel the impact of the Coronavirus Disease 2019 (Covid-19) outbreak as passenger traffic declines from the imposed travel restrictions.
However, analysts believe MAHB might see an improvement in its passenger traffic by the second half of 2020 (2H20).
MIDF Amanah Investment Bank Bhd (MIDF Research) noted that after 15 consecutive months of year-on-year growth, domestic passenger traffic in Malaysia recorded a 16.8 per cent year-on-year (y-o-y) decline in February 2020.
Similarly, it said, the international passenger traffic snapped its 15-month growth streak after recording a 29.7 per cent y-o-y decline in February 2020, a larger drop compared to the domestic passenger traffic.
It also pointed out that there was a drop in international traffic in klia2 of 29.6 per cent y-o-y in February 2020, outpacing KLIA Main Terminal’s 22 per cent y-o-y reduction.
“We are expecting the decline in passenger traffic to extend into March and April 2020 after taking into effect the wider travel ban by the Malaysian government on all Italians, Iranians, South Koreans and other foreigners arriving from these countries effective March 13, 2020,” MIDF Research opined.
It also highlighted that the North East Asian market experienced the largest reduction in scheduled airline capacity movements of 44.8 per cent from January 20 to March 9, 2020 followed by Southeast Asia at 17.7 per cent.
It noted that 1Q20 passenger traffic will see an approximately 13 per cent y-o-y decline before staging a recovery at the start of 2H20 as the Covid-19 fears are expected to subside.
“Our basis for the upside in 2H20 comes after around three million seats were added to the scheduled airline capacity in China last week, offering early signs of revival as the infection rate of Covid-19 slows down in China.
“We expect other regional airlines to follow suit in 2H20. A net result of the revision in our assumptions brings our revised annual passenger growth forecast for MAHB’s Malaysian airports to a more conservative figure of 100.1 million (previously 102.6 million) for FY20, representing a yearly decline of 4.8 per cent y-o-y,” it added.
Assuming that the Covid-19 outbreak would last in the next two to four months, the research team still expected traction from other countries namely India, which so far has only 60 confirmed cases of the Covid-19 as of late, a manageable figure so far amongst major Asian nations.
“The 15-day visa free travel had been extended for Indian nationals for the whole of 2020, coinciding with the Visit Malaysia Year campaign. Moreover, tourist arrivals from India in Malaysia reached 0.6m in FY18, almost comparable to South Korea and 52.2 per cent higher than Japan.
“Other growth factors would include the roll out of MAHB’s biometric identification process for international departing passengers by June 2020.
“We opine that the fears over the Covid-19 will subside by then. Henceforth, we still believe that MAHB passenger numbers can meet the 100.1 million mark in 2020 at the current juncture, representing a growth rate of negative 4.8 per cent y-o-y before rebounding 8.2 per cent y-o-y in 2021 underpinned by the expected recovery from Covid-19,” it said.
As for MAHB’s performance in Turkey, MIDF Research noted that ISGA’s total passenger traffic for February 2020 increased by 4.9 per cent y-o-y to reach 2.6m. In terms of international passenger traffic, the segment surged 16.6 per cent y-o-y to 1.1 million passengers during the same month.
It added, domestic traffic in ISGA declined by 1.9 per cent y-o-y to reach 1.6 million passengers.
“Looking ahead, we expect ISGA to face headwinds as Turkey just confirmed its first Covid-19 case while cases in European countries such as Italy has been growing fast recently,” it said.
With expectations of a recovery, MIDF Research retained its ‘buy’ rating on MAHB.
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