THE BUZZ

The media, quoting sources, reported that Malindo is currently in final negotiations with the Department of Civil Aviation (DCA) to seek approval to shift its operations to Subang Skypark Terminal, which is closer to Kuala Lumpur compared to Kuala Lumpur International Airport (KLIA) and the Low Cost Carrier Terminal (LCCT).

OUR TAKE

Highly unlikely. We believe this piece of news is pure speculation. Even if it was true that Malindo is seeking approval, we think the carrier’s chances of securing the greenlight from DCA are slim as Subang Skypark is only meant to accommodate small aircraft such as turboprops or Bombardiers. Malindo’s fleet comprises A320s, which are large planes. Also, allowing it to land in Subang Skypark would defeat the purpose of having KLIA2, i.e. to serve as the country’s new low-cost carrier (LCC) hub. There is a possibility that Malindo may start taking delivery of smaller aircrafts for its peninsula routes but we think this is also unlikely given that the airline has ordered a large number of narrow-body aircrafts.

Negative for competitors and MAHB if true. Should the rumour turns out to have basis, we see it as being negative for Malaysia Airports Holdings (MAHB) and AirAsia, as well as other carriers. The former stands to lose out in terms of revenue due to the lower collection of passenger service charges and leaner non aeronautical revenues while AirAsia may see its passengers opting for Malindo among the LCCs since Subang Skypark is much closer to Kuala Lumpur and the journey takes only half the time taken to cover the distance between the city and the existing LCCT.

OVERWEIGHT on sector maintained. We maintain our Overweight call on the Aviation sector, with AirAsia as our Top BUY (FV: MYR3.39). MAS (FV: MYR1.00) and MAHB (MYR7.23) remain BUYs.

Source: RHB