THE air travel industry remains in a survival mode, suffering from a cash crunch and cross-border travelling restrictions.
As such, the domestic air travel is only expected to recover back to the pre-COVID-19 level by 2022 while a full recovery for international air travel demand is only anticipated to happen in 2024, according to AmBank Research.
Taking China’s recovery as a reference, the research house in its latest transportation & logistics sector review expects the domestic and regional air travel to bounce back strongly if the COVID-19 pandemic is effectively contained either by way of contact tracing or the availability of vaccines.
“To ride on the recovery in the air travel segment, we prefer airport operator Malaysia Airports Holdings Bhd to airline AirAsia Bhd as it is a foregone conclusion that the latter will have to raise a significant amount of fresh capital to patch up the damaged balance sheet which will be highly dilutive to existing shareholders,” noted Ambank Research.
Elsewhere, the research house continues to favour the logistics sub-sector with the parcel delivery segment poised to be the winner as consumers shift their shopping habits from physical stores to online channels.
“However, the crowded sector locally continues to be weighed down by the cut-throat competition, resulting in severe squeeze in margins,” observed AmBank Research.
“We believe the logistics players will continue to focus on improving their service level and operational efficiencies to gain market shares and improve margins, which is critical for the players to survive in the overcrowded space, and eventually benefit from the e-commerce boom.”
As for the port sub-sector, the research house opined that the seaport segment has embarked on a firm and sustainable recovery path, underpinned by the reopening of global economy and a seemingly decent peak year-end holiday season as evidenced in the record high Shanghai Containerised Freight Index.
“We believe the pandemic (as well as the increased trade tensions between major economies in the world prior to the pandemic) will reshape the global supply chain, resulting in diversion of investments away from China to the Southeast Asian region, boosting container throughput in the region,” noted AmBank Research.
Moreover, the developing economies are also home to many suppliers in the fast-growing sectors such as communication equipment, semiconductors, textile and apparels which will contribute positively towards the growth in container trade volume. – Oct 22, 2020
