MITM FAIR 2023

After MATTA (see Aviation report dated 21/3/2323), we paid a visit to another major travel fair namely MITM, organised by The Malaysian Chinese Tourist Association at the Mid-Valley Exhibition Centre two week ago. There were 45 exhibitors, comprising mainly travel agents, National Tourist offices, Malaysia Domestic Tourism Board, airlines and cruise operators.

We arrived at noon and greeted by a spectacular stage performance of Yunnan Cultural dance. Not to our surprise, the fair is packed with holiday goers, hoping to snap up travel packages that are value for money and win some free air tickets.

Key takeaways

Below are some of the queries for exhibitors to gauge the recovery strength of travel sentiment:

1. What are the popular tour packages?

Zhangjiajie and Beijing tours are selling fast together with other packages like Shanghai, Yunnan, China. Hokkaido Japan is also highly sought after given the fact that Apple Vacations will charter 5 direct flights to Hokkaido in December to cater for the overwhelming demand. Genting Dream Cruise Holiday also makes its way to the popular tour package with its “2nd Pax Only RM1” anniversary promotion. Overall, we are surprised about the tremendous interest in China trips, which was a stark difference from MATTA fair. We believe this could be due to increased flight frequencies connecting Malaysia and China as well as further relaxations on entry requirements to China.

2. Has the price of travel package declined?

Generally, the prices are higher for similar packages we seen in MATTA fair 5 months ago. Interestingly, the price changes vary from as high as RM4,000 increase for a 9D/7N trip to Türkiye to RM100 decrease for Europe + London package offered by the same travel agent. Genting Dream Cruise’s offer of 4D3N PKR-PEN-SIN-PKR cruise is priced from RM2,110 (for 2 pax) with an increase of approximately RM250. Overall, we opine that the price increase is relatively mild considering year-end peak travelling season. This is underpinned by increases in flight capacities and decline in fuel cost.

3. What is the expectation on Sep-23 Matta Fair?

The upcoming Matta Fair in Sep-23 would likely sustain the momentum despite weak ringgit performance. That is the general view we gathered from the exhibitors. Separately, we believe air ticket prices would normalise further in 2024 with airlines putting more capacities to the market. Our recent price checks through AirAsia and MAS websites have shown significant declines in 2024 airfare for flights especially those popular destinations like Bangkok, Hong Kong, and Osaka. This is healthy for the market, in our opinion, as the ongoing market normalisation with rising capacities and declining airfares would put the aviation sector on a stronger footing of demand-supply equilibrium.

Mid-flight to full recovery

All in all, the visit to MITM fair reinforces our confidence on the recovery in air travel demand and look forward to full recovery to pre-pandemic levels in 2024. As such, we forecast MAHB’s passenger movements to grow to 118mn in 2024 from 90mn this year, which would surpass 2019’s total passenger movements of 105.3mn. Likewise, we expect Capital A’s FY24 to strengthen further by 18.8% YoY after turning around in FY23 with a core profit of RM399.6mn.

Recommendation

MAHB and Capital A outperformed FBMKLCI YTD with respective gains of 5% and 49% versus FBMKLCI’s loss of 3% (Figure 1). We believe the market has substantially priced in the recovery optimism, thus we advocate investors to remain on the sidelines and watch closely the development of new airport tariff structure as well as Capital A’s PN17 status in 2H23. Upgrade Aviation to Neutral (from underweight).

Source: TA Research - 8 Aug 2023