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Malaysia Airports higher on improved profit. Fraport gains, MAp loses – Share Wrap

29-May-2009

Malaysia Airports Holdings Berhad (MAHB) reported a resilient earnings performance in the 12 months ended 31-Mar-2009. Despite a 4.2% reduction in revenue, profit after tax and EBIT rose 0.6% and 2.2%, respectively.

Its main gateway, Kuala Lumpur International Airport (KLIA), continues to surf the AirAsia wave. AirAsia reported strongly positive first quarter profits and continues to expand rapidly. The carrier noted in its analyst presentation that KLIA traffic would have declined by 7% in 1Q2009, if AirAsia had not expanded. The airline's share of traffic at KLIA is expected to reach 44% this year.

AirAsia Group market share at KLIA (%): 2002 to 2009F

Airport charges under pressure?

AirAsia stated the “relevance” of rising dominance at an airport is provides “better negotiating power with airports”. CEO, Tony Fernandes, added, “the dramatic cuts in flights and capacity by many of Asia’s legacy carriers have resulted in severe traffic decreases at many of Asia’s airports. This is creating enormous opportunities for AirAsia, as these airports compete to get our business and are more amenable to provide desirable terms and concessions to AirAsia in order to attract our airline. They recognize that AirAsia can deliver significant passenger growth and revenue to their entities”.

On the other hand, the more an airline becomes entrenched at an airport, the more difficult it is to leave.

A recent report by the Centre for Asia Pacific Aviation into global airport charges that found 23 airports around the world had reduced their charges, but another 21 had increased them in the past five months.

Airports under pressure from falling throughput and calls to cut their charges are turning to non-aeronautical revenues to help them ride out the storm. MAHB noted, “initiatives have been taken by the Group to grow its non-aeronautical revenue via a retail optimization plan and the provision of more commercial spaces at the airports". 

Overall, MAHB’s outlook remains strong. The company stated the recent financial restructuring of the Group is “expected to further strengthen the future performance of the Group”.  The company’s shares rose 3.5% yesterday.

Elsewhere, Fraport rose 3.0%, while Macquarie Airports dropped back 4.4%.

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Selected airports daily share price movements (% change): 28-May-09


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