Investors concerned over MAHB’s Covid-19 rebates

By Doreenn Leong

IN the recently announced RM20 bil economic stimulus package, one of the measures to help counter the economic risk from the Covid-19 outbreak includes requiring airport operator Malaysia Airports Holdings Bhd (MAHB) to provide rebates on rental for premises at the airport as well as landing and parking charges.

While such a move will help airlines and retailers at the airport enjoy lower costs, it will mean lower aeronautical and non-aeronautical income for the airport operator.

Is this fair to MAHB given that it will also be negatively impacted by the current slowing travel numbers? As a public-listed entity, it is answerable to its shareholders as well.

 Judging from the drop in the share price of MAHB, investors are clearly not positive on such an initiative by the government.

At 3pm, MAHB was down 4.23% or 29 sen to RM6.55, giving it a market capitalisation of RM10.88 bil.

 In a strategy note on Feb 27, CGS-CIMB Research said MAHB may see a negative impact following the economic stimulus announcement.

As it is, the landing and parking charges are already one of the lowest in the region. Will lowering the charges help entice more airlines to fly to KLIA?

Will airlines pass on the lower charges to passengers by lowering their fares? Even if they lower their fares, will this help spur demand as the virus outbreak has reached much further and faster than anticipated?

The extent of the impact on MAHB is unclear as the announcement did not state the quantum of the rebates to be given. The airport operator is currently seeking more information from the government, which is now without a minister.

“We will support the government’s initiative towards implementing the stimulus package for the economy. We are currently in the midst of getting more clarification from the ministry for the rebates mentioned,” an MAHB spokesperson tells FocusM.

“End of the day, the government has to decide who needs most help from this stimulus. At this juncture it’s the airlines,” says Endau Analytics founder Shukor Yusof.

 “There’s a real risk of airlines in the region going under as a result of this outbreak but until we know the quantum of the reduction, we are unsure if such a move will indeed help the airlines. The devil is in the details.”

Shukor believes airlines should lower fares but probably would not do so as any rebates are unlikely to offset the high cost of operations.

“Many regional airlines are now flying at less than 50% loads. The longer the virus outbreak goes on, the higher the chances of some airlines going bust.

“The rebates given may impact MAHB but all things being equal, MAHB has to understand – if airlines weaken, it’s bad for airports too,” he adds.

MIDF Research said landing and parking charges contribute around 17% annually to MAHB’s aeronautical revenue.

“Rebate on landing and parking charges may potentially reduce the amount of landing and parking fees collected by MAHB,” the research house said.

MIDF Research said, the rebate would be beneficial for airlines as it would decrease their operating costs directly.

According to the Malaysian Aviation Commission, low-cost carriers such as AirAsia Group Bhd and AirAsia X Bhd are currently paying around RM400 per aircraft for landing fees (base) while parking fees are minimal.

“Meanwhile, rental revenues make up around 30% of MAHB’s non-aeronautical revenue. While the rebate for rental for premises in the airport could potentially reduce MAHB’s non-aeronautical revenue, we believe that this coincides well with its commercial reset strategy,” the research house said.

The commercial reset strategy is aimed at changing the travel retail landscape at its airports with an injection of new brands, high-end fashion retailers and a refreshed shopping experience.

“As such, rebates could attract premises to extend their contracts for existing ones while inviting new tenants at MAHB’s airports,” MIDF Research added.

For the nine months ended Sept 30, 2019, MAHB posted a lower net profit of RM507.5 mil compared with RM699.2 mil a year ago despite registering a higher revenue of RM3.9 bil versus RM3.6 bil. – Feb 28, 2020

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