KUALA LUMPUR: Aviation analysts see passenger traffic at the 39 Malaysian airports of Malaysia Airports Holdings Bhd (MAHB) grow at a faster pace this year than in 2014, with projections ranging from 4% to 6%.

Traffic at the airports increased 4.7% last year, which MAHB (fundamental: 1.15; valuation: 1.4) acknowledged was “lower than expected”. The airport operator projects a slower growth of 3% in passengers handled this year.

Analysts said with klia2’s first full year of operation in 2015, the total passenger number is expected to come in higher. This is coupled with tourism initiatives — such as the Malaysia Year of Festivals campaign — and the weaker ringgit which will help attract more foreign tourists.

RHB Research Institute aviation analyst Ahmad Maghfur Usman projects passenger traffic in 2015 to increase 6%, higher than MAHB’s forecast.

“The recovery in passenger growth may not yet reach double-digit levels in 2015, given the uncertain consumer sentiment,” he told The Edge Financial Daily by email, noting Malaysian Airline System Bhd’s (MAS) MH17 and MH370 tragedies in 2014.

For 2016, he expects a slower passenger traffic growth of 5%.

Meanwhile, Hong Leong Investment Bank Research analyst Daniel Wong forecast a 4% to 5% increase in passenger traffic at the 39 Malaysian airports, underpinned by capacity growth and load factor improvement.

An MIDF Research analyst said he had lowered his 2015 passenger growth projection to 3.5% from 4.7%.

“Our forecast takes into account the slightly softer travel sentiment [resulted] from the spate of tragic aviation incidents that occurred in 2014 and also recently,” he said, referring to the Germanwings air crash in the French Alps on March 27, 2015.

The analyst added that the downward revision of global gross domestic product growth may also weigh on travel demand.

Responding to queries by The Edge Financial Daily, MAHB said it maintains its 3% passenger growth forecast for 2015 as it is “more cautious in light of the market outlook”.

“There is, however, room for further optimism with lower fuel prices that may stimulate air travel demand, coupled with the continued initiatives by the government in promoting 2015 as the Year of Festivals,” it said by email.

For the first quarter of 2015 (1Q15), MAHB saw passenger traffic at the 39 Malaysian airports decline by 1.5% to 20.35 million from 20.65 million a year ago. Domestic movements were upped 0.7% to 10.56 million from 10.48 million in 1Q14, but not enough to offset the 3.7% fall in international passengers to 9.79 million from 10.17 million a year ago.

An aviation analyst who declined to be named, said the weaker ringgit against the US dollar bodes well for Malaysia’s travel market this year.

While Malaysians may not opt to travel overseas, he noted that foreigners may find Malaysia an attractive destination.

“We expect international traffic to compensate for lower domestic traffic. In our forecast, we actually expect the international segment to do better than the domestic segment,” he said, adding that his growth forecast stands at 3.8% for 2015.

Meanwhile, analysts expect seat capacity this year to increase to take in more passengers amid mixed moves by airlines.

As MAS undergoes a restructuring process to turn around itself, its loss-making routes are expected to be cut to ensure a return to profitability.

AirAsia Bhd (fundamental: 0.2; valuation: 0.8) and AirAsia X Bhd are also withdrawing some capacity to be redeployed elsewhere, coupled with plans to discontinue unprofitable routes to help drive improvements in yields and profitability.

“However, this could be somewhat offset by the entry or re-entry of additional flight frequency into the Kuala Lumpur International Airport from airlines such as British Airways and Qatar Airways,” said an aviation analyst.

This article first appeared in The Edge Financial Daily, on April 27, 2015.