AFTER disrupting the Malaysian aviation industry in 2013, Malindo Air appears to be scaling down its operations in Malaysia.
Part of Indonesia’s Lion Air Group, the unlisted Malindo Air has greatly reduced its fleet from a high of 42 aircraft to 18 aircraft today, according to Maybank IB Research.
“Since 1Q 2020, Malindo transferred 17 aircraft (15 B737-800s and 2 ATR 72s) to its sister Indonesian carriers (ie Batik Air and Wings Air), returned five aircraft (all B737-900 ERs) to lessors and stored one aircraft (B737-800),” revealed analyst Yin Shao Yang in an aviation sector update.
Malaysian carriers now operate 233 aircraft or 10% less than the high of 260 aircraft in 2019.
While Malindo Air is expected to take delivery of 10 B737 MAXs commencing next year, Malaysia Airlines will dispose six A380s.
“Thus, the number of aircraft operated by Malaysian carriers in 2022 will still be lower relative to 2019,” projected Maybank IB Research.
With Malindo Air likely operating a reduced fleet going forward, the research house expects the main loser to be Malaysia Airports Holdings Bhd (MAHB) via lower Malaysian passenger traffic with the main winner being AirAsia Group via higher Malindo Air average fares.
“Note that while Malindo Air fares may trend higher, so have its fuel costs.
“Thus, higher Malindo Air fares may be offset by higher fuel costs,” justified the research house.
Although Maybank IB Research is wary that its aforementioned analysis will come to naught if the 17 aircraft Malindo Air transferred to its sister carriers in Indonesia are returned to it, it suspects that this is unlikely to happen.
“Indonesian national carrier, Garuda Indonesia recently announced that it will dispose or redeliver (ie return to lessors) a whopping 71 aircraft,” justified the research house.
“Curiously, 17 of them are B737-800s.”
Recall that Malindo Air transferred 15 B737-800s to its sister carriers in Indonesia. As such, Maybank IB Research opined that it is wiser for Lion Air to retain the aforementioned 15 B737-800s in Indonesia to fill the vacuum left by Garuda Indonesia rather than return them to Malindo Air in Malaysia to duke it out with other Malaysian carriers.
All in all, the research house reiterated its “hold” call with target price of RM6.86 on MAHB and “sell” call with target price of 36 sen on AirAsia Group for now. – Oct 26, 2021
