Published May 15, 2009

KL passenger arrivals holding up

Resilience runs counter to cutback expectations

By PAULINE NG
IN KUALA LUMPUR

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DESPITE the global financial crisis, passenger arrivals in Malaysia appear to be holding up - mainly on the back of an increase in budget travel - with only a slight fall of 0.6 per cent being reported in the first four months of the year.

The resilience, in the face of trade and economic activities suffering big hits in the first quarter, runs counter to expectations that air travel would be adversely impacted as a result of consumer cutbacks.

But going by recent statistics revealed by Malaysia Airports Holdings, homegrown budget carrier AirAsia has played a key role in maintaining numbers even as arrivals at the main terminal fell.

Up to April, total arrivals to the main Kuala Lumpur International Airport (KLIA) and the low-cost carrier terminal (LCCT) in Sepang reached 8.7 million, according to the national airport operator.

'Of those, 3.8 million were for the LCCT while the main terminal had 4.9 million passengers,' Malaysia Airports senior general manager Azmi Murad told media on Tuesday.

What was interesting was his observation that the LCCT had seen growth of 31 per cent, or nearly a third, in that period. Although other budget carriers Tiger Airways and Cebu Pacific also use the budget terminal, AirAsia is by far the largest customer.

The 3.8 million arrivals up to April at the LCCT equal the total number of AirAsia passengers at local airports for the whole of last year when its market share (according to airlines) for Malaysia Airports was 21 per cent. Its sister long-haul unit AirAsia X accounted for 1.4 per cent of passengers while national carrier Malaysia Airlines made up about 38 per cent.

Given that arrivals in the first four months only dipped marginally but those at the LCCT rose over 30 per cent, passenger traffic at the main KLIA terminal probably dropped by a corresponding amount.

This is likely to advance the argument for work on the new RM2 billion (S$826 million) permanent LCCT to be accelerated. The current one is inadequate to cope with AirAsia's aggressive expansion. Construction is slated to commence later this year with completion expected in the third quarter of 2011, when the airport would be able to accommodate 30 million passengers annually, expandable to 45 million and even up to 65 million if required.

This anticipated growth in the carrier's business has prompted a stockbroker to call a 'buy' on Malaysia Airports. In a note to clients this week, HwangDBS-Vickers Research said that besides its defensive earnings from stable rental income, a recent financial restructuring exercise would see the government shield the airport operator from incurring unnecessary costs or revenue losses. But it also pointed out that the government-linked company, which is 73 per cent owned by state investment agency Khazanah Nasional, could be one of the biggest beneficiaries of AirAsia's 'potential strong passenger growth'.

The region's largest budget carrier which has a fleet of 80 aircraft plies more than 122 routes and its group chief executive and founder, Tony Fernandes, said last month that the economic slump notwithstanding, the airline had yet to see a slowdown in sales, thanks to its lower fares and varied routes.

In its report, HwangDBS noted that besides the economic slowdown, other threats to the airport operator include a flu breakout. Even then, the latest global crisis in the form of swine flu has had little impact on arrivals in Kuala Lumpur, Mr Azmi said, noting that there had been no flight cancellations despite the A(H1N1) scare.