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Malaysia Tourism Report Q4 2011
Business Monitor International, Oct 2011, Pages: 67
Core Forecasts
In the absence of any more timely data from Tourism Malaysia (their most recent data cover January 2011), BMI has decided to use tourist arrivals data released by the state of Sabah’s tourist board as a proxy this quarter. The data show there was an 15.8% year-on-year (y-o-y) increase in tourists (foreign and domestic) visiting Sabah over January-July 2011, totalling 2,504,669.
This strong performance is likely to have been repeated across the country. Against this backdrop, BMI forecasts a 6% increase in tourist arrivals in 2011, to reach 26.03mn. Beyond 2011, BMI believes the Malaysian tourism market can continue to show steady growth of 5-7% per annum and forecasts the country to welcome nearly 32.6mn tourists in 2015.
BMI remains bullish about the long-term prospects for Malaysian tourism, which continues to benefit from strong government support and a relatively secure, stable political situation. The country offers a range of tourism options, from travel for meetings, incentives, conferences and exhibitions (MICE) to beach holidays, and the government is committed to supporting an industry that is an important generator of foreign exchange.
Malaysia Airlines-Air Asia Tie-Up Announced
In August 2011, national flag carrier Malaysia Airlines announced that it had entered a five-year ‘comprehensive collaboration framework’ with rival AirAsia, urging the two airlines to ‘complement each other’s businesses so as to leverage on their respective core competencies and optimise efficiency for the benefit of consumers’.
The two airlines also entered a share swap deal, whereby Tune Air (the parent company of AirAsia) will exchange 10% in AirAsia shares for 20.5% in Malaysia Airlines shares. Malaysia Airlines’ parent company, the state-run Khazanah Nasional, plans to acquire a 10% stake in AirAsia’s long-haul carrier, AirAsiaX, at a later date.
The deal will mean the two airlines cooperate in areas such as plane purchases, training, catering and the opening of new routes. Malaysia Airlines is also going to change its low-cost Firefly subsidiary airline into a full-service airline, so it stops being in competition with AirAsia.
There has been some speculation that this tie-up could be a precursor to a full merger of the airlines, although this seems unlikely over the short term. What it should do is allow AirAsia to consolidate its domestic dominance, while allowing Malaysia Airlines to concentrate on increasing its market share on more lucrative international routes. BMI believes the deal could work well for both airlines.
Also in August 2011, AirAsia reported strong Q211results. These showed a 15% annual increase in revenue, to MYR1.08bn, plus a 0.6% increase in pre-tax profit to MYR145mn.
Company CEO Tony Fernandes was particularly pleased with the performance of the company’s Thai subsidiary, where net profit was up by 875% y-o-y, and its Indonesian subsidiary, where revenue was up by 37%. Fernandes was hopeful that AirAsia Philippines should be able to launch services in Q411, subject to regulatory approval. The airline has also signed a deal with Japan’s Nippon Airlines to establish AirAsia Japan, although no start date for this new carrier has been announced.
BMI is upbeat about the outlook for the fast-growing low-cost carrier, with its only concern being the risk that the company is expanding ‘too far, too fast’ and could be vulnerable in the event of a renewed global economic slowdown in the coming years.
Further information on Air Asia and Malaysia Airlines, as well as Genting Malaysia (including historic financial data, corporate information and SWOT analyses), can be found in the Company Profiles section of this report.
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