KUALA LUMPUR, Sept 17 -- The aviation industry’s outlook is looking brighter following the reopening of Langkawi to vaccinated travellers, with Malaysia Airports Holdings Bhd (MAHB) set to be the straightforward beneficiary of the domestic travel bubble, said CGS-CIMB Securities.
“The restoration of airline capacity and air travel to Langkawi is positive for MAHB because of the increased pax traffic and low air fares coupled with the ongoing hotel promotions in Langkawi.
“Airlines like AirAsia Group Bhd will also benefit although in the initial phase, it may have to contend with strong competition, low fares, uneven loads on outbound and inbound flights, and the presence of passengers using their credits from previously-cancelled flights,” the brokerage said in a note today.
CGS-CIMB said despite the introduction of a testing regime as part of the Langkawi travel bubble, there was still risk of COVID-19-infected travellers entering the island, potentially causing outbreaks and clusters, and some newly-infected travellers might bring the virus back to their home states.
According to the securities firm, these risks might be higher for the Langkawi travel bubble than for the Phuket Sandbox programme due to the lower stringency level of the COVID-19 tests for Langkawi.
“As a result, the Langkawi travel bubble may be paused in the future if infection outbreaks happen.
“Certainly, the domestic travel reopening will not necessarily progress in a straight line; we expect starts and stops along the way,” it said.
In the Phuket Sandbox programme, both international and domestic travellers need to be vaccinated against COVID-19 and also have to clear RT-PCR tests, which have an accuracy of almost 100 per cent.
In the Langkawi instance, less-accurate saliva self-test kits are admissible, with accuracy of at most 94 per cent, according to pharmaceutical sources.
CGS-CIMB has reiterated its overweight call on the aviation sector, with MAHB as its top pick. It gave an “add” recommendation for the airport operator with a target price (TP) of RM6.96 and a “reduce” call for AirAsia Group with a TP of 23 sen.
In its view, AirAsia Group runs the risk of being classified as a Practice Note 17 company by Jan 8, 2022, if the low-cost carrier does not address its negative shareholders’ equity position, or Bursa Malaysia does not extend the exemption period.
-- BERNAMA
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