Mavcom expects passenger traffic to grow 5%-6% in 2020

by NUR HAZIQAH A MALEK

THE Malaysian Aviation Commission (Mavcom) has projected a passenger traffic growth of between 5% and 6% year-on-year (YoY) as demand is expected to be supported by domestic seat capacity growth in 2020.

For the first half of 2019 (1H19), passenger traffic grew by 5.2% YoY to 53.1 million, with domestic traffic registered a growth of 9.1% YoY on the back of domestic seat capacity growth of 7.8% YoY.

“This was slightly higher than Mavcom’s initial expectation of domestic seat capacity growth of 7.3% YoY for 2019.

“Additionally, passenger traffic at non-KUL (Kuala Lumpur International Airport) airports grew by 9.8% YoY ahead of KUL’s growth of 2% YoY,” the commission said in its report released yesterday.

Mavcom executive chairman Dr Nungsari Ahmad Radhi (picture) said the commission notes the growing development of alternative airport hubs such as Johor Baru, Kuching and Kota Kinabalu in 2019 as carriers allocate more seats to these airports, which enables a wider choice of domestic destinations.

“Greater allocation of seats for these airports supported the domestic-led growth in 2019 and is expected to persist in 2020, where routes within Sabah and Sarawak will experience the highest growth,” he said.

The commission also revised its 2019 passenger traffic growth forecast to 6.4%-7% YoY, which translates to 109.1 million-109.7 million.

This indicates for potentially higher tourist arrivals by air next year, in conjunction with the Visit Malaysia 2020 campaign.

“During the previous Visit Malaysia campaigns in 2007 and 2014, tourist arrivals increased by 19.5% YoY and 6.7% YoY respectively.

“If this still holds true in 2020, international passenger traffic growth will be lifted,” it said.

For 1H19, the arrivals by air increased by 400,000 to 4.8 million, which corresponded to an 8.8% YoY growth, while the share of total tourist arrivals by air increased to 36%.

This translates to an increase of total tourist arrivals of 4.9% YoY to 13.4 million for the same period, attributable to higher arrivals from Indonesia, China and Thailand, mitigating the decline from Singapore and Brunei.

Collectively, the five countries make up 78% of the total 13.4 million arrivals in 1H19.

Meanwhile, capacity expansion by Malaysian carriers and profitability are expected to be cautious and under pressure next year.

“Given the slower growth in capacity, average fares by the carriers are anticipated to remain flat or rise slightly.

“The slowdown in capacity growth may also enable Malaysian carriers to improve their load factors,” it said.

Similarly, rising costs might be the cause to maintain pressure on Malaysian carriers’ profitability.

“Aerodrome operators’ earnings could also be influenced in 2020 due to the continued seat capacity expansion in the domestic market, given that domestic passengers pay lower passenger service charges (PSCs).

“As a result, revenue growth from PSC collection may lag passenger traffic growth,” it said.

During 1H19, Malaysian carriers reported an average operating profit margin of 0.3% in 1H19 due to rising costs.

The carriers’ cost per available seat kilometre (CASK) increased by 5.9% YoY in 1H19 to 17.9 sen, while revenue per available seat kilometre (RASK) decreased by 2.2% YoY to 15.9 sen, noting the RASK-CASK negative spread in 1H19 of two sen was notably wider than the same period last year with negative spread of 0.7 sen.