Less turbulence forecast for aviation sector in 2014

by **Cals** Fri 27 Dec 2013, 16:36

Business & Markets 2013

Written by Bernama

Friday, 27 December 2013 15:05

KUALA LUMPUR (Dec 27): The local aviation industry is set to fly at cruising altitude next year, with great growth prospects ahead, after having gone through some minor turbulence this year.

Local airlines can make 2014, a year to remember as Malaysia Airlines, AirAsia and Malindo look set to go head-to-head in the battle to win customers and keep them.

Malaysia Airlines will replace old aircraft to make way for the arrival of new planes to help further improve product offerings.

The national carrier will use the additional capacity to increase frequencies to meet passenger demand and fly to new destinations.

Its solid business model includes aggressive marketing and promotions, better capacity management, optimising asset utilisation and driving productivity.

Meanwhile, low-cost carrier AirAsia's positive growth is set to continue into the New Year while its long-haul service, AirAsia X, is aggressively expanding capacity from time to time.

The group has placed the largest single airline orders with Airbus for an additional 25 A330-300s valued at US$6 billion.

New aircraft will provide the carrier with the ability to offer non-stop services to destinations in Europe or one-stop services to the United States.

Malaysian-based hybrid airline, Malindo Air, will spread its wings in India by aggressively adding six more destinations by the end of next year.

It will start the Kuala Lumpur-New Delhi sector at the end of this month, followed by Trichy, Tamil Nadu, on Jan 2, 2014 and Mumbai, Maharashtra, on Feb 15, 2014.

The government also pledged to transform Malaysia into a regional aviation hub which would have a multiplier effect on the economy.

Prime Minister Datuk Seri Najib Tun Razak tabled the 2014 budget with the promise to formulate a National Aviation Policy, aimed at strengthening the ecosystem and services network in the aviation industry.

2014 will also usher in Visit Malaysia Year, the nation's biggest and grandest tourism celebration aimed at luring a record 28 million international tourist arrivals.

This programme will bode well for the overall aviation sector including, airport operator, Malaysia Airports Holdings Bhd, as it will boost passenger arrivals.

RHB Research Institute expects competition between AirAsia and Malaysia Airlines to remain challenging but less severe.

"However, Malindo will be less aggressive due to its high-cost structure," said analyst Ahmad Maghfur Usman.

He said this bode well for the two dominating local carriers, AirAsia and Malaysian Airline, if they play their cards right in maximising yields and loads.

"Intense competition has resulted in airlines luring travellers with big
discounts, which will help boost demand for air travel," he said, adding that this would benefit Malaysia Airports.

New budget terminal, KLIA2 which is scheduled for May 2, will also give a massive boost to the industry.

Ahmad Maghfur said high jet fuel prices, volatile exchange rates and stiff competition were among factors that affected airlines' earnings this year.

The fate of AirAsia and Malaysia Airlines over the fine imposed by the Malaysian Competition Commission in September for allegedly breaching competition laws was likely to be known in January.

On September 6, 2013, the commission announced that the companies would be fined up to RM10 million each for infringing section 4(2)(b) of the Competition Act 2010 by entering into an agreement which saw the two airlines sharing markets within Malaysia.