KLIA T2 maintains retail occupancy rate as airlines cut capacity

Traders Union
All News
Financial News
KLIA T2 retail occupancy remains

Highlights

KLIA T2 maintains stable retail occupancy despite airlines cutting capacity by up to 30% since April due to fuel cost pressures.
The global average price of jet fuel reached U.S.$194.90 per barrel in the week ended 18 Sept, up 116.5% from a year earlier, affecting the profitability of airlines such as AirAsia and Batik Air Malaysia.
Total Terminal 2 passenger traffic fell 5% year on year to 17.48 million from January to August, but the trend began recovering to 1.98 million in August.

This article was translated from the original. Read the original version by our correspondent here.

Space reconfiguration and occupancy rates

As reported by The Edge Malaysia, Malaysia Airports Holdings Bhd said the hoarding visible at several KLIA T2 lots does not necessarily reflect weak retail performance at the terminal, but is partly related to space reconfiguration plans. The airport operator said several commercial areas are being repurposed to improve passenger processing and movement, with some premises in the affected areas scheduled to be phased out by year-end.

MAHB, which operates KLIA as well as 38 other airports in Malaysia, said commercial performance does not depend solely on passenger volume. The company added that passenger profiles, premises locations, retail categories and the performance of individual businesses also affect revenue, but it declined to disclose tenant-level sales or passenger spending due to commercial sensitivity.

Fuel pressure hits Terminal 2 traffic

The clarification comes as airlines at KLIA T2 face a sharp rise in fuel costs and weaker capacity on certain routes since the U.S. and Israel launched attacks on Iran in February. Platts and S&P Global data show that the global average price of jet fuel reached U.S.$194.90 per barrel for the week ended 18 Sept, up 116.5% from a year earlier.

Low-cost carriers such as AirAsia Group Bhd and Batik Air Malaysia are particularly exposed, as fuel typically accounts for 30% to 50% of operating costs, while some airlines remain largely unhedged. Some airlines have reduced capacity by as much as 30% since April to limit fuel consumption and contain costs, while AirAsia said on 18 Sept that it had cut capacity by 20% to 25% in the third quarter and expects to restore it toward pre-Iran war levels in the fourth quarter.

The pattern is reflected in KLIA T2 passenger traffic. From January to August this year, total traffic across KLIA rose 2.1% year on year to 41.95 million, but Terminal 1 grew about 8% to 24.46 million passengers while T2 fell 5% to 17.48 million. MAHB, however, said traffic has started to recover since June, with T2 passenger numbers rising from 1.83 million in June to 1.86 million in July and 1.98 million in August.

MAHB said the latest trend indicates a gradual recovery following mid-year capacity reductions, and the company will continue monitoring airline capacity, passenger traffic and commercial performance. For airlines, cost pressure remains significant, with Maybank Investment Bank Research estimating in a 21 Sept report that every U.S.$1 increase in jet fuel prices could reduce AirAsia's earnings by RM75 million.

In an earlier article, we reviewed changes to the board composition of Malaysia Airlines Bhd and Malaysia Aviation Group (MAG), including the departures of Tan Sri Bashir Ahmad Abdul Majid and Wong Shu Hsien, as well as the appointments of Azmir Zain and Jens Bischof as non-executive directors. We also highlighted governance concerns, as the MAG chairman position has remained vacant since the retirement of Tan Sri Wan Zulkiflee Wan Ariffin, while the group continues its operational recovery amid rising jet fuel costs.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.