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Malaysia’s Passenger Traffic Forecasted to Contract Between 36.2 and 38.1 Per Cent in 2020 due to COVID-19

27 Mar, 2020

 

Malaysia’s Passenger Traffic Forecasted to Contract Between 36.2 and 38.1 Per Cent in 2020 due to COVID-19
Clarity of policy objectives and exercise of good governance crucial for Government in determining any financial assistance for airlines

 

KUALA LUMPUR, 27 MARCH 2020 – The Malaysian Aviation Commission (MAVCOM) today published the sixth edition of its Industry Report, Waypoint, which lays out the Commission’s outlook for the industry in 2020. In addition, the Commission published a Commentary On Government Assistance To The Aviation Industry Amidst The Covid-19 Pandemic.

Following the global outbreak of COVID-19, MAVCOM undertook a further review of its outlook of the Malaysian aviation sector for 2020. As outlined in today’s publication of Waypoint, the Commission revised its forecast for Malaysia’s passenger traffic from a growth of between 4.6 per cent and 5.7 per cent, to a contraction of between 36.2 per cent and 38.1 per cent year-on-year (YoY). This translates to between 67.7 million and 69.7 million passengers in 2020, a considerable decrease from 2019’s all-time high of 109.2 million passengers.

The revised forecast took into account existing flight cancellations by both Malaysian and foreign carriers totalling 14.0 million seats for the period between January and December 2020, in addition to further seat reductions of 15 per cent for domestic routes and 20 per cent for international routes. The Commission highlights, however, that material developments continue to occur in Malaysia and globally during these unprecedented times, thus quickly affecting the outlook for the industry here. As such, MAVCOM will continue to monitor such industry developments and look to make adjustments to its forecasts accordingly.  

Malaysian carriers are continuously reducing seat capacity in 2020 in response to low air travel demand and travel restrictions imposed by countries worldwide. 7.3 million seats have already been cancelled (as of 26 March 2020), representing 8.6 per cent of total seat capacity for Malaysian carriers in 2020. Foreign carriers operating to and from Malaysia have also reduced seat capacity by 6.7 million (24.5 per cent of total seat capacity for foreign carriers) in 2020.

In line with the severe decrease in travel demand, aviation industry operators are presently experiencing great difficulty in maintaining their financial well-being. In the context of whether the Government should provide assistance to industry operators, particularly the airlines, the Commission expresses its view in the Commentary On Government Assistance To The Aviation Industry Amidst The Covid-19 Pandemic that in the light of other public interests competing for public fiscal aid such as healthcare and small-medium enterprises, the Government should be deemed only a last resort for aviation industry operators in seeking assistance.

The Commission advocates for adherence to principles of good governance in the event the Government does choose to provide financial assistance to airlines, and indeed such principles should be imposed on any recipient of Government assistance in order to prevent misuse of public funds. 

As an additional measure to strengthen the industry’s financial resilience over the longer term, MAVCOM also urges the Government to consider relaxing ownership rules for airlines to allow easier sourcing of funds from domestic and international capital markets. The Commission also highlights the need for adherence to merger control provisions contained in the Malaysian Aviation Commission Act 2015 should any step towards industry consolidation via mergers be explored, to ensure industry and consumer interests remain safeguarded.

Dr. Nungsari Ahmad Radhi, Executive Chairman of MAVCOM said, “Aviation is perhaps the industry worst hit by the global COVID-19 outbreak as travel has almost stopped, forcing airlines to be essentially grounded thereby putting them in serious financial distress. Our Waypoint report paints a bleak picture. The airlines’ survival, indeed, the landscape of domestic and global aviation industry when the crisis is over, are matters that are still unfolding. Malaysia needs an aviation sector that supports its economic growth as well as passenger demand for travel. Therefore, the country needs connectivity and healthy competition among airlines. A major crisis such as this calls for radical solutions including further consolidation and liberalization, keeping in mind the national imperatives for the industry, safeguarding competition and consumer interests, and practicing good governance. The industry welcomes help from the government, in any appropriate form, but we are mindful of the demand for public resources in a time like this.” 

Waypoint reports are now released on a quarterly basis. Copies of the Waypoint report and the Commentary can be found on MAVCOM’s website at www.mavcom.my.

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