KUALA LUMPUR (Feb 15): Malaysian commercial aviation industry sales are forecast to grow at 10.3% annually in nominal US dollar terms over 2016–2020, according to US-based research firm IHS Global Insight.
In a statement today, the firm's chief economist for Asia-Pacific Rajiv Biswas forecasts the rapid pace of growth will be boosted by rapidly growing middle class incomes in Malaysia as well as in neighbouring economies in East Asia, which will help to boost air passenger traffic flows in Malaysia.
"The decision of the Malaysian government in the revised Budget 2016 to remove the visa requirement for Chinese tourists has the potential to substantially boost long-term air passenger traffic and tourism flows to Malaysia if the policy remains in place in future," he said.
Biswas stressed that the rapid growth in air travel in China and India will be key drivers for Asia-Pacific's aviation industry growth over the medium term.
"With continued rapid rise in Chinese household incomes expected over the medium term, the Chinese air transport industry's sales growth is forecast to grow at an average annual rate of 11.3% per year over 2016–2020 in nominal US dollar terms, a pace that is well above the Asia-Pacific regional average growth rate," he said.
Apart from that, Biswas said India is forecast to be one of the world's fastest growing aviation markets, with total sales growth per year in the Indian air transport industry forecast to be 14.2% per year over 2016–2020 in nominal US dollar terms.
"The Asean Open Skies policy for liberalisation of air transport will also help to support the growth rate in the aviation industry," he added.
Meanwhile, Biswas said the Asia-Pacific's commercial air transport sales are forecasted to grow at 9.2% per year in nominal US dollar terms over 2016–2020, which is significantly faster than the 7.5% growth rate forecast for world commercial air transport sales over the same period.
"Strong growth in passenger numbers together with the significant fall in the Asia-Pacific's air transport operating costs due to the sharp decline in oil prices are also boosting aviation industry profits, which are forecast by the IHS World Industry Service to grow at around 9% per year over 2016–2020," he explained.
Biswas also noted that growth in Asia-Pacific's passenger numbers over the medium term will also underpin strong growth in capital expenditure (capex) by the region's airlines in fleet modernisation and expansion with capex forecast to grow at an average annual rate of 8.1% per year over 2016–2020.
Locally, he said Malaysian commercial aviation gross profits are forecasted to grow at 10.9% annually across 2016–2020, helped by the impact of the sharp decline in world oil prices since mid-2014, with only a gradual recovery expected in oil prices over the medium-term outlook.
"Capital expenditure growth for the Malaysian commercial aviation industry is forecast to grow at 10.9% per year over 2016–2020, due to the rapid expansion in air passenger traffic in Malaysia," Biswas said.
"The Maintenance, Repair and Overhaul (MRO) industry in Malaysia is forecasted to grow rapidly in order to support the strong growth in airline fleets, and will be an important source of new high value-added jobs as well as building Malaysia's aerospace industry cluster," he added.
Nevertheless, Biswas said Singapore is forecasted to continue to strengthen its role as a leading commercial aviation and MRO hub for the Asia-Pacific region.
Singapore's commercial aviation industry sales are forecasted to grow at 6.2% per year over 2016–2020 in nominal US dollar terms.
The island nation's MRO hub already has over 100 aerospace companies, creating an international cluster of excellence to service the rapidly growing jet aircraft fleets of Asian airlines, Biswas noted.
In the Asean region, Biswas said Malaysia and Indonesia are forecast to be the two fastest growing commercial aviation markets in Southeast Asia, helped by rapidly growing Asia-Pacific tourism flows and the strong growth of regional low-cost carriers such as AirAsia Bhd.