Malaysian Airlines (MAS)’s operating stats in February 2013 gained strength as the overall load factor improved by 590 bps y-o-y. Domestic demand accelerated due to the Chinese New Year holidays, while international RPK and load factor picked up after the national carrier joined the oneworld alliance. With the growth well within our expectations, we maintain our BUY call and RM1.00 FV.

Stronger February figures. MAS’ February 2013 operating stats showed significant improvements, with its overall load factor improving by +590 bps yo-y to 74.4%. The cumulative two-month load factor also grew by +360 bps yo-y to 72.8%. Meanwhile, February domestic revenue passenger kilometre (RPK) and load factor surged +29.6% y-o-y and +1,250 bps y-o-y respectively, mainly driven by Chinese New Year holiday demand.

Oneworld raises the bar. While domestic demand was mainly driven by festival factor, we believe MAS’ improved international RPK and load factor –which grew +21.0% y-o-y and +640 bps y-o-y – was the positive result from the group joining the full membership of oneworld alliance on 1 Feb 2013. As expected, the additional feed from the oneworld alliance would boost the national carrier’s yield and revenue, and we are positive that the momentum will continue.

Meeting expectations. On an annualised basis (as shown in Figure 1 below), MAS’ passengers RPK and ASK were slightly below our full-year forecasts. Nevertheless, we believe the group may soon meet our full-year forecasts as we expect passengers fed from the oneworld alliance to remain strong. Although cargo growth was weaker than expected, we are not too concerned since the passenger segment remains MAS’ main earnings contributor.

Source: RHB