Mavcom cuts passenger traffic forecast between -48.7% and -50.3%

THE Malaysian Aviation Commission (Mavcom) has revised downward its passenger traffic forecast as the industry reels from the Covid-19 crisis.

Passenger traffic growth is expected to contract between 48.7% and 50.3% year-on-year for 2020 from a previous -36.2% and -38.1%. These estimates translate to between 54.3 million and 56 million passengers this year compared to 109.2 million passengers last year.

“This forecast considered a lower annual load factor assumption due to muted demand during the first five months of 2020 and further seat cancellations,” Mavcom said in its June Waypoint report.

“As at early June 2020, Malaysian and foreign carriers have cancelled 38.8 million seats (34.9% of total 2020 seat capacity) due to Covid-19. This is 25.1% greater than Mavcom’s previous estimate of 31 million seats,” the regulator said.

Mavcom said it expected 35.2% of domestic and 42.9% of international seats to be cancelled in 2020, totalling 44.8 million seats (40.3% of the originally planned capacity in 2020).

Meanwhile, revenue-at-risk for Malaysian and foreign carriers was estimated to be RM11.3 bil and RM4.6 bil (previous estimates: RM6.8 bil and RM5 bil) respectively (51.1% of estimated total airfare revenue in 2019, collectively), Mavcom said.

For Malaysian aerodrome operators, it is RM0.5b bil (previous estimate: RM0.4 bil) (33.4% of estimated total revenue derived from passenger service charge in 2019), added the regulator.

“Given the low passenger traffic, the inherently high fixed costs of both airlines and airports are now spread over fewer passengers, which necessitates the need for additional capital injections to sustain their business,” Mavcom said.

Airline seat capacity is expected to take a long time to recover given the severity of the Covid-19 pandemic and the ensuing economic downturn, said Mavcom.

“The speed of the recovery will largely be driven by public health measures to instil travel confidence and the consistency of actions undertaken by airlines, airports, and governments. To this effect, the International Civil Aviation Organisation’s ‘Take-off Guidance’ provides a framework for air travel operations during this period,” Mavcom said. – June 26, 2020

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