PETALING JAYA: The availability of vaccines in the country has certainly renewed optimism that air travel may return to normal soon even though experts believe any recovery will be gradual beginning in the first quarter of 2022.
Profitability for airlines may take much longer as most airlines, including AirAsia Group Bhd, are expected to continue to face tough operating conditions as there could be sporadic resurgence of Covid-19 infections.
The International Air Transport Association’s (IATA) has forecast for global air travel to only return to pre-pandemic levels by around the end-2023.
Airport operator, Malaysia Airports Holdings Bhd (MAHB) is still favoured for its monopolistic position and the yet-to-be signed operating agreement (OA) is seen as a re-rating catalyst for the stock, said Kenanga Research.
MAHB's KLIA - File pic
“The new OA with the government following the extension of the concession – yet to be signed – will pave the way for the stock to be re-rated.
“We believe the new OA will be investor-friendly, and create a sustainable long-term development for MAHB which has been hit by the pandemic in terms of passenger traffic growth in Malaysia and Turkey, ’’ the research house said.
On April 12, 2019, MAHB said the government had approved the extension of MAHB’s concession to operate 39 airports in Malaysia from 2034 to 2069.
As for AirAsia, the house said it views the recent fund raising, via new share issues in order to shore up liquidity, positively. It is an interim measure to address its immediate cash flow requirements during the on-going pandemic.It added that the private placement is part of the airline’s plans to raise between RM2bil to RM2.5bil in a combination of debt and equity funding to ensure sufficient liquidity.
It said AirAsia is navigating its recovery phase as key operational metrics improved in the first quarter of financial year 2021.
Kenanga has a “neutral’’ call on the sector. For MAHB, it has an “outperform’’ call with a target price of RM7 per share, and “underperform” call for AirAsia, with a target price of 70 sen a share.