Aviation industry beaming with optimism on sector's outlook
Published on: Tuesday, December 23, 2014
KUALA LUMPUR: Aviation industry players are beaming with optimism on the sector's outlook next year, as the current slump in global oil prices will lower airlines' operating cost.The downtrend in crude oil prices, which fell 47.5 per cent from 2014's peak, would augur well for the sector's earnings and yields especially after the two aviation tragedies involving the disappearance of Malaysia Airlines' (Mas) MH370 on March 8 and the downing of MH17 in eastern Ukraine on July 17.Industry players are expecting jet fuel prices for 2015 and 2016 to average at US$100 per barrel and US$110 per barrel, respectively.ADVERTISEMENT Rockwell Collins' Airport Business Development Regional Director Andrew Seow believes the propensity to travel is huge in Malaysia given its large population.Rockwell Collins is an information technology systems and services provider for aircraft manufacturers."Asia-Pacific is the growth area for travel and Malaysia is well-placed to benefit from that," he said.Moreover, when the Asean open skies policy takes off next year, the regional aviation industry would be in for bigger business as air travel within the Asia-Pacific is projected to triple by 2030.ADVERTISEMENT Malaysia's new low-cost carrier terminal, the KLIA2, the biggest budget carrier terminal in Asia, would be more than ready to take on the additional capacity. Aviation tycoon and AirAsia Group Chief Executive Officer (CEO) Tan Sri Tony Fernandes is also broadly confident that travel demand would pick up next year as cheaper jet fuel price would prompt cheaper air fares.
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"Furthermore, with the appointment of Irish carrier Aer Lingus CEO Christoph Mueller as the new chief of MAS, we believe that the national carrier will be well-managed. "A healthy MAS is good for our aviation industry," he added.Mueller is known for his skills in structural repositioning of airlines in difficulties, with accomplishments such as turning around loss-making Aer Lingus and German airlines Lufthansa to the path of profitability.With the turnaround plan in mind, the national carrier's major shareholder, Khazanah Nasional, announced the privatisation of MAS at 27 sen a share on Aug 8 and consequently, unveiled plans to restructure the airline on Aug 29.Managing Director Tan Sri Azman Mokhtar announced Khazanah Nasional would inject RM6 billion into MAS and the flag carrier is projected to be profitable by end-2017, and relisted on Bursa Malaysia between 2018 and 2020.RHB Research aviation analyst Ahmad Maghfur Usman said the soon-to-be privatised Mas' restructuring plan would likely involve capacity cuts on loss-making routes and frequency reductions. "More importantly, this ought to put to an end to its irrational pricing strategy, which is the chief cause behind the sector's depressed yields. "MAS has yet to announce the size of its capacity cuts, but we estimate that this could be between 10 per cent and 15 per cent of its available seat per kilometres at best, as its core focus ought to be on cutting its workforce by 30 per cent and raising ticket prices," he said.The research house expects 2015 passenger growth to inch up 6.0 per cent, year-on-year, while 2014 would bring in 4.4 per cent higher passenger growth, year-on-year.While the Goods and Services Tax (GST) to be implemented in April 2015 might weigh on consumer spending, RHB Research expects spending trends to gradually normalise over the course of next year.Stay up-to-date by following Daily Express’s Telegram channel.
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"Domestic routes will see tickets being subjected to a 6.0 per cent GST, however, international routes and routes departing from tax-free zones such as Langkawi will be exempt from the tax. "Still, we do expect the carriers to absorb part of the taxes," Ahmad Maghfur added. –Bernama