This report profiles Malaysia’s aviation industry, discussing market trends through 2014 and outlook for 2015 and beyond. The report also highlights leading players in the sector including Malaysia Airports Holding Berhad (MAHB), Malaysia Airlines System Berhad (MAS), and AirAsia Berhad (AirAsia).

The aviation sector has played an important role in developing the Malaysian economy and has helped in stimulating other sectors of the economy like tourism, hospitality and trade. In the last decade, the Malaysian aviation industry saw a period of high growth in passenger traffic at both domestic and international terminals. Malaysia was the 16th largest civil aviation market in the world in terms of air passenger traffic as of 2013.

FY14 turned out to be a tough year for the Malaysian aviation sector, particularly after the strong growth experienced in FY13. There was a slowdown in passenger traffic and commercial aircraft movements in FY14, mainly due to slower growth in domestic and foreign tourist arrivals. Recent fatal air accidents of Malaysia Airlines flight MH370 and MH17, as well as Indonesia AirAsia flight QZ8501, added to the woes of the aviation industry. However, despite the tragedies, Malaysia was one of the most visited countries in the world in 2014. The country attracted close to 28 million tourists during the year.

The implementation of a 6% Goods and Services Tax (GST) starting April 2015 will increase cost pressures and raise passenger service charges. This might have a negative effect on passenger traffic in the near term. However, in the long-term, growth will be driven by an increase in tourist arrivals, growing popularity of Malaysia as an Asian travel hub, rising importance of Kuala Lumpur as an international financial centre and surge in per capita income. The total passenger traffic at Malaysian airport terminals is expected to grow at a CAGR of 6% till 2020.

Key Points:

• During 2004-14, the total passenger traffic at Malaysian airport terminals grew at a CAGR of 7.8%. This growth was higher compared to the average figures recorded globally.

• The passenger traffic at Malaysian international airport terminals reached 39.8mn in 2014, up by 5% y/y but much lower than the growth rate of 17% in 2013.

• Malaysia was the 16th largest civil aviation market in the world in terms of air passenger traffic as of 2013. It constituted around 1.5% of the world’s air passenger traffic.

• The contribution of air transportation segment to Malaysia’s GDP was around 0.5% of GDP. The segment grew at a CAGR of 3% during 2007-13.