-  Local dailies reported that British Airways (BA) will resume its services to KLIA, as part of its £5bil expansion plan. This came on the heels of comebacks of a few other airlines recently, such as Air France, Turkish Airlines and Philippines Airlines.

-  BA will commence its services on 27 May 2015 on a daily basis operated by a four-cabin class Boeing 777-200 airplane with a total of 219 seats. BA last operated in KLIA in 2001 due to low load factor amid the Asian economic crisis and Sept 11 terrorist attacks.

-  We understand that there are about 460,000 passengers flying on the KL-London route each year.

-  We are not surprised by this news, as both parties have been in discussions for several years.

-  We are also positive on this as the resumption of BA’s services would partially mitigate the effects of the expected capacity cuts on long haul routes by MAS. As BA is a member of the Oneworld alliance, this would further enhance connectivity through cooperation and code-shares with current members operating in KLIA – including MAS.

-  In the more immediate term however, we expect MAHB’s share price to remain weak amid the uncertainties over the route rationalisation as a result of MAS’ restructuring plan.

-  This is further fuelled by disappointing passenger numbers in MAHB’s latest traffic report due to the aftermath of MH370 and MH17 tragedies, while traffic from China continued to experience double-digit decline.

-  We leave our estimates unchanged for now pending further details. Maintain HOLD.

Source: AmeSecurities