Aviation sector to see full recovery from pandemic this year
KUCHING: The aviation sector is expected to see a full recovery from the effects of the covid-19 pandemic in 2024 says analysts at Midf Amanah Investment Bank Bhd (MIDF Research).
In a sector update report, MIDF Research highlighted that in Dec 2023, Malaysia’s passenger traffic had recovered to 78 per cent of pre-covid levels, reflecting a significant increase of 55.4 per cent from 2022’s levels, with a total of 81.8 million passenger movements.
Breaking that down into domestic and international segments, the domestic sector recovered to 77 per cent while international 78 per cent.
The strong traffic growth in 2023 was a result of China’s border reopening and expanded airline capacity through aircraft reactivation and new deliveries said the research arm.
“Six new airlines resumed services, with the highest traffic directed to Indonesia, China, South Korea, and the Middle East. 72 airlines were operating at all airports managed by Malaysia Airports Holdings Bhd (MAHB), marking an increase from the 66 airlines in 2022.”
MIDF Research added that the average load factor stood at 77.2 per cent in 2023 which translated to a 5.9 per cent y-o-y increase, but Dec 2023 managed to register the highest average load factor at 80 per cent for both international and domestic sectors.
While the passenger traffic improvement has been impressive, MIDF Research guided that it had fell short of their expectations as it only met 91 per cent of their estimates. They explained that the negative deviation was due to MRO challenges impacting the restoration of seat capacity.
Nevertheless, the research arm who maintains a ‘Neutral’ call on the aviation sector opined that for 2024, they are expecting this passenger traffic growth momentum to continue and make a full recovery to prepandemic levels.
To support their view, they pointed out that the latest airlines’ seat capacity filing had indicated a 13 per cent y-o-y increase from 2023’s.
The growth momentum is expected to be further supported by the visa-free entry initiative for Chinese and Indian tourists implemented by the Ministry of Tourism and the scheduled full fleet reactivation of AirAsia in the first quarter of 2024 (1Q24) which should “catalyse the compelte recovery of air passenger traffic.”
While the impact of the visa-free entry which was implemented in Dec 2023 has yet to be significantly evident, MIDF research guided that it would likely materialise in the nearterm as seat capacity growth gradually adjusts to increased demand.
MIDF Research opined that passenger traffic in 2024 will register a 4 per cent growth from 2019 pre-covid levels, which is slightly more optimistic that the Malaysian Aviation Commission’s forecast of a 2 per cent growth.