THERE are two sides of the coin to foretell what the immediate future holds for the aviation industry.
From a gloomier perspective, MIDF Research remains convinced that there are several critical challenges that require scrutiny and level-headed thinking.
They are (i) border controls, travel restrictions and quarantine measures, (ii) consumer and government confidence, and (iii) financial viability.
On the brighter side, the research house is optimistic that the darkest days of the pandemic which haunted aviation players are behind us.
“Now, investors can certainly gauge with more clarity on the prospects of the sector. Aviation players are must-have pickings for post pandemic recovery play,” justified analyst Ummar Fitri in an aviation sector update.
“Pummelled stocks from yesteryear can be the darlings of the future.
Despite the conviction of better days ahead, MIDF Research holds the view that the road to recovery is woefully precarious.
“We foresee that air travel demand will recover meaningfully, however, only at a portion of pre-pandemic level for CY2021,” projected the research house.
With vaccines introduction and subsequent administrations in the horizon, there should be light at the end of the tunnel for aviation players.
This is compared to during the height of pandemic with rising cases globally; we cannot foresee hope of remedy.
Currently, with positive development on the vaccine fronts, the recovery narrative can be gauge with better clarity.
Furthermore, with governments and businesses are more adept on managing the pitfalls of the virus, we believe punitive measures that hinder air travel will soon will gradually eased and potentially lifted (eg travel bubbles between countries, universal screening for air travellers, etc).
Nevertheless, the research house maintained its “neutral” call on the aviation sector
“We are hopeful on aviation recovery but maintain level headedness in assessing the viability of the recovery,” justified MIDF Research.
“While the new course charted seemed conservative, we consider it as a precautionary and reasonable at a time when sentiment that lifted the share prices of aviation players may be excessive given uncertainty surrounding vaccines introductions and administrations.
Despite the shift from our previous bearish outlook to more moderate narrative, the research house is adamant that a full recovery for the aviation industry in Malaysia will not take shape in CY 2021.
“We project a real turning point for aviation players in CY 2022. We postulate pent-up demand of air travels will propel the recovery of traffic volume,” reckoned MIDF Research.
“Return to normalcy will sustain the recovery forward to reach peak of pre-pandemic in CY2019 albeit it will take a few years.”
The Malaysian Aviation Commission (MAVCOM) has taken a far more positive stance on passenger traffic by projecting passenger traffic to grow by between +94.2% year-on-year (yoy) and +100.3% yoy, translating to 51.7 million to 53.3 million passengers in view of a low base effect in CY2020. – March 19, 2021
