Proposed Sarawak-owned airline a risky venture, say analysts

By RAHIMI YUNUS / Pic By BERNAMA

A PROPOSAL by the Sarawak state government to set up its own airline company is seen as a risky venture due to the lack of commercial value in direct flights from Kuching to international cities in the current market environment.

Maybank Investment Bank Bhd analyst Mohshin Aziz said other carriers have introduced direct connections from Kuching to overseas previously and found such routes were not commercially viable.

“Quite frankly, the reason why there is no connection by airlines yet is because there is no market. Malaysia Airlines Bhd (MAB), AirAsia Group Bhd and Malindo Air have tried a lot of (Sarawak) routes in the past whereby some worked and some did not,” Mohshin told The Malaysian Reserve (TMR).

According to recent media reports, Sarawak is currently working on a proposal to set up its own airline, partly an effort to revisit an old and failed plan by the state government to take over MASwings Sdn Bhd.

Sarawak Chief Minister Datuk Patinggi Abang Johari Abang Openg said the proposed airline could connect Kuching with strategic destinations in the region.

“I am inclined to say it is a risky venture. Even the three commercial airlines (MAB, AirAsia, Malindo) do not see much market for Sarawak to have international destination connections,” Mohsin added.

For instance, Kuching to Hong Kong, Sydney or Jakarta are currently served by airlines with one layover at the Kuala Lumpur International Airport (KLIA). Mohshin said even China may not be big enough a market for Sarawak to have direct flights to compared to Kota Kinabalu (KK) in Sabah.

He said Kuching or Langkawi is the fourth and fifth most frequented airport in the country behind KLIA, KK and Penang, and Kuching’s air traffic volume is mostly domestic.

MIDF Research analyst Adam Mohamed Rahim said the proposed Sarawak-based carrier may pose competition to MASwings and AirAsia locally.

“MASwings is likely to be most impacted due to its large rural air services (RAS) in Sarawak,” Adam told TMR.

The federal government is currently conducting a review on RAS routes to rationalise the amount of subsidies it pays to MASwings under the existing framework.

Putrajaya has commercialised two routes, the KK-Bintulu and KK-Sibu sectors, to AirAsia beginning this year.

Adam said the proposed state-owned airline may explore Belaga, Bukit Mabong Kapit and Long Silat sectors in its initial stage, followed by other RAS routes which are open to commercial airlines.

Internationally, Adam said Sarawak’s airline may want to serve the Kuching-Shenzhen route amid the suspension of services by AirAsia.

Adam said the proposed Sarawak-owned airline could enhance Borneo as an aviation hub and it bodes well with the state’s target to increase tourist arrivals, inline with the opening up of RAS routes.

He said the number of tourists entering Sarawak has increased gradually from 2015 to 2017, before taking an 8.8% year-on-year dip in 2018 to 4.43 million passengers.

The Sarawak government has targeted to achieve five million tourist arrivals this year.