KUALA LUMPUR (May 28): The Malaysian Aviation Commission (Mavcom) is forecasting a year-on-year (y-o-y) growth of 6.5% to 7% in the nation's passenger traffic at between 105.6 million and 106.1 million passengers in 2018. Mavcom said this is in anticipation of favourable consumer and business sentiment driving demand for air travel.

Mavcom said today in its Malaysian aviation industry outlook report that 2017 passenger traffic grew 8.1% to 99.1 million passengers.

"Strong industry performance to continue in 2018 as passenger traffic expected to breach 100.0 million. For the first time in Malaysia's history, passenger traffic will surpass 100.0 million.

"In addition, the slower expansion in Malaysian carriers' seat capacity will allow them to maintain high load factors without having to resort to price wars. Therefore, it is expected that they will be able to maintain fares at the 2017 levels," Mavcom said.

Today, Mavcom also noted that the expected increase in crude oil and jet fuel prices may exert downward pressure on airlines' profitability when fares are currently low.

According to Mavcom, for the first four months of 2018, average crude oil and jet fuel prices increased 18.4% and 25.3% from a year earlier respectively. Mavcom said the International Air Transport Association and the United States Energy Information Administration are forecasting oil prices to increase between 10.7% and 30.5% in 2018.

"In 2017, the price of crude oil and jet fuel increased by 44.8% y-o-y and 52.7% y-o-y, respectively. Despite this, the average fares for Malaysian carriers fell by 7.7% y-o-y to RM371 in 2017," Mavcom said.