The low-cost carrier is seen as a positive for the sector and travellers, as well as Malaysia Airports Holdings Bhd.
PETALING JAYA: The entry of MYAirline, a new low-cost airline, this month is expected to spice up the local aviation scene, as the sector is seeing moderate growth.
The entry of the new airline is positive for the sector and travellers. It is also positive for airport operator Malaysia Airports Holdings Bhd
(MAHB).
However, the impact will be mildly negative for existing low-cost carrier Capital A Bhd.
Maybank IB Research said while it believes that history is repeating itself with the “birth” of MYAirline, it cautions that there are a few very important differences between 2013 and today.
In 2013, Malindo Air, now known as Batik Air, was born and it is still operating till this day and is a keen competitor in the marketplace.
Having a fleet of four Airbus A320, MYAirline has big ambitions of having 50 aircraft over the next five years.
It will begin with flights from Kuala Lumpur to Johor Baru, Langkawi or Penang.
The research house believes the new airline’s strategy of having a single type of aircraft makes it more cost-effective, helping keep turnaround times low, utilisation rates high and unit costs low.
MYAirline is 98%-owned by Datuk Goh Hwan Hua, also known as Datuk Allan Goh, and 2%-owned by Rayner Teo, the chief executive officer of MYAirline.
MYAirline is said to have managed to secure low aircraft lease rates during the onset of the Russia-Ukraine war which saw lessors scrambling for lessees, lest demand for aircraft plummet due to the war.
As all airlines, whether low-cost or full-service, incur fuel expenses, pay landing and parking charges and hire staff, the lower aircraft lease rates could make all the difference to an airline’s cost competitiveness.
The Maybank IB report said despite the prospect of MYAirline’s low aircraft lease rates, it understands the airline does not plan to undercut its peers by a lot.
Local airlines have been much disciplined in maintaining fares at reasonable levels over the last two quarters and MYAirline does not intend to break ranks.
Unlike the pre-Covid period, the Malaysian aviation industry has been plagued by overcapacity and that has prompted Malaysian carriers to undercut each other to the point that no airline generated a profit in 2019.
MYAirline did not share financial data with the research house but did state that it does not expect to be profit generating in the next two years, but aims to break even before five years.
Maybank IB has maintained its “buy’’ calls on MAHB and Capital A while reiterating its positive view on the Malaysian aviation sector which is seeing demand recovery as borders restrictions are eased.
