The virus outbreak is likely to reduce passenger arrival, particularly from China and Singapore, by 15% to 20%

By SHAHEERA AZNAM SHAH / Pic By MUHD AMIN NAHARUL

DOMESTIC airlines’ financial performance for 2020 is expected to take a beating following the rapid spread of coronavirus that caused airlines to temporarily suspend flight to China.

MIDF Amanah Investment Bank Bhd analyst Adam Mohamed Rahim said low-cost carrier (LCC) AirAsia Group Bhd’s 12-month revenue for its financial year 2020 (FY20) is estimated to post a 7% decline in net profit.

“We understand that passengers who are flying to or from destinations in mainland China are given options for a credit account or a full refund.

“Assuming the worst-case scenario where all affected passengers in its mainland China routes opted for a full refund, we estimate that AirAsia Group’s revenue passenger kilometres (RPK) could decline by 10% to 20%, lowering the load factor below 80%, assuming capacity remains unchanged. He said this will reduce the LCC’s profit after tax by 7%. Adam added that AirAsia Group’s available seat kilometres (ASK) for China contributes to a 10% to 15% of the LCC’s total ASK, while its longhaul arm, AirAsia X Bhd, could register a higher portion.

“Management guided that AirAsia Group’s ASK for China routes contributes approximately 10% to 15% of its total ASK.

“In comparison to its long-haul affiliate, AirAsia X, we opine that its ASK for China routes is higher given the non-exposure to Asean,” he said.

Airport operator Malaysia Airports Holdings Bhd (MAHB), which recorded a 6.6% increase at 39 of its airports worldwide in January, is expected to be affected by a drop in passenger traffic in February arising from travel restrictions imposed on Chinese tourists.

“Assuming that the average daily passenger traffic remains around 140,000 passengers per day for international and 130,000 per day for domestic in February, the total passenger movement will decline by approximately 3.8% YoY. The virus outbreak, which is expected to prolong into May 2020, is likely to reduce passenger arrival, particularly from China and Singapore, by 15% to 20%.

“This will bring our revised annual passenger growth forecast for MAHB’s domestic airports to a more conservative figure of 109.3 million for FY20,” he said.

Amid the outbreak, the Malaysian Aviation Commission (Mavcom) has reduced its passenger traffic growth projection for 2020 between 4.6% and 5.7% against 5% to 6% calculated in December last year.

Yesterday, AirAsia Group’s shares fell 2.38% or three sen to RM1.23, shaving its market capitalisation to RM4.11 billion.

MAHB’s shares declined 0.43% or three sen to RM6.87, bringing its market capitalisation to RM11.4 billion.