This article first appeared in The Edge Financial Daily on May 16, 2019

KUALA LUMPUR: Malaysia’s passenger traffic is expected to grow by 2.9% to 4.1% to between 105.5 million and 106.7 million this year from 102.5 million in 2018, says the Malaysian Aviation Commission (Mavcom).

The aviation regulator said the moderate growth forecast is on the back of greater uncertainty ahead as global and local economic growth are expected to slow marginally.

“For 2019, we expect to see downward pressure on yields and therefore, similar downward pressure on revenues for Malaysian carriers as seat capacity growth is expected to surpass passenger traffic growth,” said its executive chairman Dr Nungsari Ahmad Radhi in the commission’s fourth edition of its biannual industry report titled “Waypoint” yesterday.

He added that lower jet fuel prices this year can bring some respite to any financial pressure faced by carriers.

The average global crude oil price in 2019 is expected to be lower by 13.6% year-on-year (y-o-y) from US$71 per barrel in 2018. In contrast, average global jet fuel price rose 28.8% y-o-y in 2018 from US$65 per barrel in 2017.

“The commission is monitoring domestic demand growth capacity closely in light of the expected increase in seat capacity as that will have a significant bearing on the financial health of Malaysian carriers. International traffic growth depends on many other factors but we would like to see better numbers for Asean traffic,” noted Nungsari.

Last year, the country’s passenger traffic grew 2.7% y-o-y to 102.5 million — surpassing 100 million for the first time — from 99.8 million in 2017. The growth was primarily driven by international traffic that rose 5.5% y-o-y as domestic passenger traffic growth was flat at 1.1% y-o-y.

Mavcom blamed the weaker passenger traffic growth on the slower gross domestic product growth of 4.7% from 5.9% in 2017 and lower seat capacity growth by both Malaysian and foreign carriers of 6.4% and 4.5% compared with 8.6% and 15.6% in 2017, respectively.

“Several Malaysian carriers embarked on domestic capacity rationalisation exercise that contributed towards the weak growth of domestic passenger traffic. Malaysia’s passenger traffic growth in 2018 was the lowest compared with other Asean member states that reported growth of between 3.7% and 25%,” it added.

Average revenue per available seat kilometre (RASK) for 2018, meanwhile, was marginally higher at 16.3 sen as average international fare fell 2.4% to RM486, while average domestic fare remained unchanged at RM221.

The average cost per available seat kilometre inched upwards by 5.1% to 17.8 sen. This was achieved against a backdrop of a 28.8% increase in global jet fuel prices during the same period.

Average load factor in 2018 dropped slightly to 81.8% despite tempered capacity expansion of 3.2% and flat RASK growth, signalling weak demand, said Mavcom.