MAHB share price surges
Airport operator’s stock rallies on plan to sell Turkish operations
PETALING JAYA: Malaysia Airports Holdings Bhd (MAHB) shares surged 30 sen to close at RM9.10 a share on news that it plans to sell its Turkish operations.
The Turkish operations, held via Istanbul Sabiha Gokcen International Airport (ISG), has been loss-making for some years now even though MAHB expects it to turn the corner this year.
The shares hit an intra-day high of RM9.17, short of its all-time high of RM9.40 in June last year.
MAHB said on Friday that it is in talks with ten parties to sell its stake in ISG. It also plans to set up a new subsidiary to park its international operations so that there is better transparency. The airport operator also plans to sell some stakes in the new subsidiary.
That aside, by the third quarter of the year airport services will be subject to scrutiny by the aviation regulator, which will impose fines of 5% of revenues if the QoS is not up to the mark, and this could hurt MAHB’s bottomlines if it does nothing to improve services.
Maybank Investment Bank Research believes the move by the Malaysian Aviation Commission (Mavcom) has short-term negative implications for the earnings for MAHB and airlines in the longer term.
Maybank believes the QoS will be extended to airlines by next year. The scrutiny will be on long waits, on-time punctuality, airport tax reimbursement for no-show passengers and compensation for flight delays and cancellations.
Up to now only Malindo Air offers automatic refunds for airport tax to no-show passengers but the regulator, Malaysia Aviation Commission (Mavcom) wants automatic refunds of airport tax for ticket cancellations or a no-show for flights to save consumers the hassle of requesting the same from airlines.
Maybank said MAHB has to spend more to address its “weak points or risk hurting their profits.’’
There has been a spate of complaints for MAHB’s services, be it for cleanliness of its toilets, long queues, unfriendly staff, delayed baggage, and periodic breakdown of its aerotrain. MAHB did say it would spend 30% more in capital expenditure to upgrade, automate and refurbish its service in its quest to provide better service to travellers that pay airport taxes for such services.
MAHB manages 39 airports in the country, except Senai Airport. However, enforcement is the biggest issue and experts said that while the regulator can impose rules, it should be efficient in enforcement to raise the levels of QoS, more so since Mavcom has plans to charge RM1 levy to all departing passengers from Malaysian airports.
MAHB has forecast air passenger traffic growth of 6.3%, while AllianceDBS Research expects aircraft fleet to grow by about 8.6% this year, which is more than triple the projected 2.8% in 2017. The research house said this will be driven by Malaysia Airlines’ reversal of fleet growth after three years of capacity cuts, and AirAsia Group’s expansion, although the biggest challenge for airlines this year is higher fuel cost.
“While robust supply induces stronger competitive pressure, we think airlines would be sensitive to higher jet fuel prices, which has crossed US$70/barrel, and its potential impact on unit costs. As such, airlines may use dominant or unique routes to support yields, or if necessary pass on excessive costs directly via higher fares. We expect fare competition to be rational and offer potential upside to yields.
“That said, given the modest demand outlook, load factors may come off recent record levels as a trade-off,’’ AllianceDBS said.