Aviation Sector Review
- Government makes decision to mandate increases in East Malaysia flight frequencies after complaints on delays and inconvenient schedules.
- Government has also decided to reinstate 2 more routes to MASleaving AirAsia with only its JB-East Malaysia routes as exclusive.
- It appears that the Government is backtracking on earlier decisions to leave frequencies in the hand of the airlines. This may cause increased competition and lower load factors amongst both AirAsia and MAS. AirAsia may still face some teething problems in relation to its East Malaysia flights and the supervision of FAX.
- Opening of KL-Singapore route looking like a greater possibility and may be beneficial to Malaysian tourism in the long run. However, possibility of opening up Singapore-East Malaysia routes may sap traffic from KLIA and Senai.
- Drop in jet fuel price definitely welcome for both airlines. Our view is for a rebound in winter before a stronger retracement next Spring. Nonetheless, we maintain our Neutral calls on both airlines for now given limited upside.
- We await greater clarity on MAS’ cost saving exercises and a fuel hedge would be good for AirAsia.
Full Research: OSK Securities