HSR to become game changer for airlines
KUCHING: Ful l - service carriers ( FSCs) could be taking a hit when the newly- announced high speed rail link between Singapore and Kuala Lumpur is competed seven years from now.
Fol lowing the SingaporeMalaysia Leaders’ Retreat earlier this week, the prime ministers of both Malaysia and Singapore have agreed to build a high speed rail ( HSR) link between Kuala Lumpur and the city state, targeted for completion by 2020.
The project, described as a ‘ huge game changer’ by Datuk Seri Najib Razak, was expected to cut travel time between the two cities to just 90 minutes.
Even if the LCCs do see some passenger traffic diversion to the HSR, we reckon that the decline could likely be short term. Ahmad Maghfur Usman, OSK Research analyst
According to OSK Research Sdn Bhd (OSK Research) analyst, Ahmad Maghfur Usman, “As f lights to Singapore account for the biggest chunk of Kuala Lumpur’s international air passenger volume, followed by Jakarta, Bangkok and Hong Kong, airlines with exposure to the Singapore-KL route would be subject to downside risks.”
However, he believed that the downside risk to passenger volume would be fa i rly manageable for the low- cost carriers ( LCCs), as it was possible that their fares would be much more attractive.
“Even if the LCCs do see some passenger traffic diversion to the HSR, we reckon that the decline could likely be short term.
“However, as HSR fares could be more attractive compared with the airfares of FSCs, we foresee that the latter could be hit most, with a permanent drop in yields,” he explained further.
On the other hand, for the total net passengers for airport operator, Malaysia Airports Holdings Bhd ( MAHB), the analyst expected short- term drop in passenger traffic could only account for three to five per cent of total passengers handled and the impact would be short-term.
In addition, Ahmad Maghfur believed the the decline in air passenger volume on the Kuala Lumpur to Singapore route would likely be offset by higher volume for other routes as the improved economic ties between the two countries would boost per capita income as well as the propensity to spend.
The HSR track would span a distance of approximately 350 kilometres connecting Singapore and KL.
However, no details were given on whether the rail would be just a point-to- point connection or that it would have stops on the way.
The analyst believed that the 2020 completion of the HSR was too far ahead to be priced into the Malaysian aviation stocks.