Malaysia Airports Successfully Achieves Cost Containment By 31.5% In Response To Continued Contraction Of Passenger Traffic.
HIGHLIGHTS FOR THE PERIOD ENDED 30 SEPTEMBER 2020 (9M2020)
* Group costs successfully reduced by 31.5% or RM708.9 million in 9M2020
* Group revenue stood at RM1,602.7 million, 58.6% lower than 9M2019 against a 65.5% drop in total passenger traffic
* Group Loss After Tax widened to RM431.2 million amidst prolonged impact from the COVID-19 pandemic and continued border closures
* ISG's passenger traffic showed continued signs of recovery since the opening of domestic and international borders in June
* Malaysia Airports committed in making Malaysia a cargo distribution hub with the opening of Cainiao Aeropolis eWTP Hub
SEPANG - Malaysia Airports Holdings Berhad (the Group) reported a contraction in revenue by 58.6% to RM1,602.7 million for the period ended 30 September 2020 (9M2020). However, effective cost containment efforts executed by the Group had led to a sharp contraction in total costs by 31.5%, or RM708.9 million. The prolonged impact from the COVID-19 pandemic, which had resulted in a 65.5% drop in total passenger traffic to date, effectively widened the Group's Loss After Tax for the same period to RM431.2 million.
Despite the overall reduction in passenger traffic for the Group, Istanbul Sabiha Gokcen International Airport (IATA Code: SAW) (ISG) carried 34.7% of the Group's 36.2 million passengers in 9M2020, compared to only 25.7% of the Group's passenger volumes in 9M2019. The increase is attributed to the earlier opening of international borders at ISG in June, paving the way for a faster recovery.
Operations review
Malaysia's domestic traffic has gradually improved, recording passenger traffic of 4.2 times higher in September since the upliftment of inter-state travel ban in June 2020, in line with the global trend of faster domestic recovery compared to international travel.
Passenger traffic for Malaysia operations reduced by 69.6% to 23.7 million passengers in 9M2020. KL International Airport (IATA Code: KUL) recorded a 72.9% reduction of passenger traffic to 12.5 million passengers for the same period while other airports in Malaysia recorded an aggregate decline of 64.9% to 11.2 million passengers.
The 9M2020 traffic in ISG saw a much lesser decline of 53.5%, with 12.6 million passenger movements in that period. ISG shows continuing signs of recovery momentum with strong demand for both domestic & international air travel. This is reflected in the robust passenger load factors recording above 70% since August.
Outlook
The global economy and travel market have been severely impacted by the COVID-19 pandemic, with cross-border restrictions introduced by most countries in efforts to curb the spread of the virus. Virtually all airports around the world have recorded significant contraction in traffic for the year-to-date.
Apart from the initial recovery in domestic air travel, other catalytic factors which will spur traffic recovery includes the gradual reopening of international borders, especially for countries within Asia Pacific. Some countries have already begun discussions to synchronise the screening and quarantine processes. This approach is expected to have spill over effects to domestic air travel whilst improving international sector movements.
ISG meanwhile has shown positive revival in passenger movements in September 2020. The removal of border closures added with the strategic location of Turkey, has given ISG the edge to regain connectivity with other neighbouring regions.
Commentary
Up to September 2020, Malaysia Airports has managed to successfully reduce its total costs by 31.5% or RM708.9 million compared to last year, owing to the vigorous and sustainable containment efforts. Effective cost cutting measures, on top of the deferment of non-critical capital projects has allowed Malaysia Airports to continuously sustain its operations across Malaysia and Turkey in light of the prolonged effects of the pandemic.
Malaysia Airports also continues to pursue new initiatives in broadening its income base. Earlier this month, Malaysia Airports together with its partner, Cainiao Smart Logistics Network, the logistics arm for Alibaba Group, announced the commencement of operations of the Cainiao Aeropolis eWTP Hub. According to Dato' Mohd Shukrie Mohd Salleh, Group Chief Executive Officer of the Group, Malaysia Airports is committed in making Malaysia as a cargo distribution hub within the ASEAN region. He added, 'With the growth in cargo volumes, we are looking at improved airline connectivity via KUL with new routes and increase in flight frequencies, belly space utilisation and freighter capacity. We hope to double the current cargo volumes to 1.4 million metric tonnes in the next 10 years.'
MALAYSIA AIRPORTS HOLDINGS 
