Passenger traffic growth declined significantly in 2018

Locally, the MAVCOM industry outlook itself revealed that overall passenger traffic growth in Malaysia has significantly declined to three per cent in 2018 from 10 per cent in 2017.

The projection was partly due to strong reduction in domestic seats capacity from the second quarter of 2018 onwards.

Hence, the commission is forecasting the passenger growth traffic for the current year to be between 2.2 to 3.3 per cent yearon-year (y- o-y).

Nungsari said the market structure for the airline industry is tough in nature and could be equated to the automotive industry,.

He added that there were more automobile companies 30 years ago than now.

“The same goes to airlines companies globally. The automotive sector has undergone a consolidation similar to the aviation industry. The first and second rounds of ‘ marriages’ had happened in the US,” he said

While merger and acquisition in the automotive industry were seamless, the airline industry mostly went into code- sharing and alliances, namely, OneWorld, SkyTeam and Star Alliance as part of their rationalisation exercise.

Perhaps, it is about time that airlines look into regional level tie- ups, as well as merger and acquisition, said Nungsari.

As a regulator, MAVCOM cannot decide for the airlines on their corporate move, but in general, airlines have no option but to look into the next phase to continuously survive in the fast evolving and challenging industry, he said.

“(Airlines such as MAB need to look into this) because the yield has reduced. It has gone down over the years, making Malaysia unattractive to airlines to fly to. Malaysia’s hub ambition will also be a challenge (to achieve),” he said.

Citing international carriers, Nungsari said the once mighty industry giants, Pan American World Airways (Pan Am) and Trans World Airline (TWA) were the best example in this scenario.

The US’ Pan Am had its glorious years circa 1970, but filed for bankruptcy in 1991 due to overcapacity, low passenger demand and rising fuel cost issues.

Likewise, TWA failed to cope with the environment during airline’s deregulation in the 1980s, and lacked of focus on the transPacific and air cargo markets, leading to financial troubles.

Similarly, the higher jet fuel cost has been the biggest factor threatening the profitability of Malaysian carriers and this may persist well into 2019 as global jet fuel prices are expected to further increase.

Thus, collaborating with airlines with a larger footprint or network would be the answer, he said. — Bernama