MYAirline to make moderate impact on Malaysian aviation – Maybank IB

MYAirline to make moderate impact on Malaysian aviation – Maybank IB

KUALA LUMPUR: A new budget carrier, MYAirline, is slated to commence operations this month, drawing comparison with the entry of Malindo Air in 2013.

Going by past experience, the entry of a new airline into Malaysia’s aviation market should be positive for Malaysia Airlines Holdings Bhd (MAHB) and negative for low-cost airline group Capital A Bhd.

Maybank Investment Bank Research noted that the last time a Malaysian airline commenced operations was with the launch of Malindo in 2013.

“MAHB Malaysia passenger traffic surged 18% YoY while Capital A’s AirAsia Malaysia average fares fell 10% YoY in 2013.

“Essentially, the entry of a new airline is positive for MAHB but negative for Capital A,” the research house said in a report.

However, it noted that industry capacity going forward will be more moderate despite the entry of MYAirline, leading to more moderate positive/negative impact to MAHB and Capital A this time around.

“Given that Malaysian airlines will not be adding much capacity in the near term coupled with MYAirline’s plan not to undercut its peers by a lot, it also follows that the Malaysian aviation sector will not return to pre-Covid days when overcapacity drove Malaysian airlines to undercut each other to the point that no Malaysian airline generated a profit in 2019.

“Thus, the easing in MAA fares from the entry of MYAirline will likely be more moderate this time around,” it said.

According to Maybank IB, MYAirline intends to adopt the low-cost carrier business model in a fashion similar to Capital A.

“Going forward, MYAirline aims to lease more than 50 aircraft over the next five years. For now, MYAirline intends to lease only Airbus A320s and has no plans to lease Boeing B737 MAXs or Airbus A330s.

“The single type of aircraft (Airbus A320) and configuration (180 seats) means that crew are specialised in a single type of aircraft. This means that there is no need to re-train crew to operate different types of aircraft and stocking parts for different types of aircraft.

“This is instrumental in keeping turnaround times low, utilisation rates high and unit costs low,” it said.

The research house added that sources say MyAirline could dethrone Capital A as the world’s lowest-cost airline as it had secured low aircraft lease rates during the onset of the Russian-Ukrainian war, which saw lessors scrambling for lessees.

Nevertheless, it noted that the low aircraft lease rate should only apply to a handful of MYAirline’s aircraft as further delivery of aircraft is likely to command higher lease rates.

Maybank IB maintained its “buy” calls on both MAHB and Capital A, and reiterated its positive view on the Malaysian aviation sector.

It trimmed its target price on MAHB to RM7.16 from RM7.25 while maintained Capital A’s target price at 84 sen.

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