Strong recovery in Turkey buoys Malaysia Airports in Q3; Eraman expansion a key focus

MALAYSIA. Malaysia Airports today reported results for the first nine months of 2021, with its Turkish operations delivering a boost to revenues in the third quarter. The company also said that it is streamlining and refocusing in-house retail business Eraman’s operations as recovery begins (see below).

The group recorded nine-month revenue of RM1,121.6 million (US$265 million), down by -30% year-on-year due to a -39.7% contraction in passenger numbers to 21.9 million. This was largely a result of the impact of Malaysia’s Movement Control Order (MCO) and continued interstate and international travel restrictions.

Malaysia Airports in the first nine months compared to the same period in 2019; below, how revenue broke down. Click to enlarge.

Non-aeronautical revenue decreased by -35.6% to RM444.7 million (US$105 million) compared to the same period the previous year due to lower commercial rental revenue across Malaysia operations. Within this, retail income plummeted by -83.3% to RM23.5 million (US$5.5 million) due to lower traffic and a New Rental Model across Malaysian airports.

However, the third quarter saw group revenues rise by +16.3% year-on-year to RM461.3 million (US$109 million), driven by higher passenger volumes at Istanbul Sabiha Gökcen International Airport, aided by the relaxation of border and inter-city travel in Turkey. Within this, non-aeronautical revenue increased by +41.7% to RM173.3 million (US$41 million), buoyed by a return of business in Turkey.

Passenger traffic in Turkey almost doubled in Q3, from 4.9 million to 8.9 million. In September alone, traffic reached 86% of 2019 levels. Passenger traffic for Malaysian operations contracted by -77.8% to 1 million in Q3.

How the two main airports in the Malaysia Airports network performed in the nine months (2019 and 2021) compared to their peers. Click to enlarge. 

From January to September, group loss before tax narrowed to RM254.9 million (US$60.3 million), an improvement on the loss of RM384.8 million in the nine-month period a year earlier.

Focus on Eraman

In its Q3 announcement, Malaysia Airports also commented further on its plans to develop its in-house retail division, Eraman, as traffic returns.

Its flagship P&C and Emporium outlets are being refurbished, with a focus on high-yield margin product categories such as cosmetics and spirits. Extending food & beverage operations – a channel Eraman has sought to grow in over recent years – is also high on the agenda.

A plan for Eraman, as set out by the group in its Q3 announcement

Other priorities include growing the offering across a variety of distribution channels, online and offline, launching a new sales incentive plan internally, and “reordering plans and terms with brand principals and suppliers to gain on bulk rebates and improve working capital”.

At the main Malaysian airport, Kuala Lumpur International, duty free outlets will be refreshed in 2022, alongside further expansion of F&B, including the Food Garden and QSR outlets.

More widely, Malaysia Airports said it plans to “unlock” 14,355sq m of new commercial space in addition to the 67,252sq m in existing space across its Malaysian network, as part of its continuing Commercial Reset programme. Some 49 new stores are expected to open, representing a variety of brands across categories.

Looking ahead, the company said that there were some positive signals for the future of travel. In Malaysia, domestic traffic has registered “encouraging improvements” since the launch of the Langkawi travel bubble programme from 16 September.

The reopening of interstate borders and relaxation of rules for fully vaccinated Malaysian residents, who have been able to travel abroad from 11 October onwards, is another positive step towards recovery, said Malaysia Airports. The company also cited a statement by National Recovery Council (MPN) Chairman Muhyiddin Yassin on 11 November that Malaysia’s borders should be open to international tourists by 1 January 2022.

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