Malaysia's Air Traffic Recovery To Hit 94% In 2024 - MIDF

Malaysia's aviation passenger traffic is now forecast to recover to 94% this year, a sharp increase from the modest four% growth initially projected, MIDF Research said.

In a research note, the firm said it recently revised its passenger traffic forecasts for Malaysia due to industry challenges, including aircraft delivery delays and shortages of parts and labour.

“That said, the recent appreciation of the ringgit against the dollar and easing fuel prices are benefiting airlines, as most of their expenses, particularly jet fuel, are US dollar-denominated.

“We also anticipate that the high-yield environment will persist, with average fares likely to rise as Malaysia Airlines temporarily reduces capacity by 20% for the rest of the year,” it said.

MIDF also noted that key international markets driving the increase in passenger traffic were Indonesia, China and India.

It anticipates the trend for China and India will continue, supported by the reciprocal 30-day visa-free travel policy, with China extending this policy for Malaysians until December 2025.

Notably, recovery rates for China and India stood at 98% and 93%, respectively, as of the end of the second quarter of 2024.

“Meanwhile, the domestic sector recovery registered a slight 2.3% year-on-year in August 2024, driven by Subang Airport's jet operations following the introduction of new services by local airlines,” the firm added.

MIDF expects this sector's recovery to stay within the 80 to 90% range for the remainder of the year, constrained by capacity limits as airlines focus on international markets with stronger demand.

As a result, MIDF Research maintained its 'neutral' rating on the sector, with Capital A Bhd remaining its top sectoral pick, as its aviation business has been less affected by recent disruptions. Its target price for Capital A was set at RM1.06.

"We believe its fleet activation and expansion plans position it well to address capacity gaps," it added.