Malindo Airways Sdn Bhd is slated to take delivery of 15 more aircraft this year: 11 Boeing 737s, two ATR 72-600 turboprops, and two Airbus A330-300s.
Malaysia Airlines plans to order 25 wide-body aircraft by the end of the year.
AirAsia plans to increase its fleet size to over 200 aircraft this year.
Although profitability is expected to be affected this year, the airlines are looking to the future.
According to a report in The Edge Financial Daily, the industry’s view is that the longer-term passenger growth will be robust enough to fill the additional capacity coming in.
“Globally, passenger traffic is expected to grow. In fact, we are expecting it to double to seven billion by 2035. The Asia-Pacific region is expected to be the source of more than half the new passengers over the next 20 years,” the report quoted International Air Transport Association (IATA) spokesman Albert Tjeong as saying.
According to a passenger demand forecast paper published last October, IATA expects 7.2 billion passengers to travel in 2035, compared with 3.8 billion air travellers in 2016, based on a 3.7% annual compound average growth rate.
Explaining why airlines continued to invest in new aircraft, Tjeong said: “It is not based on current market conditions, but longer-term considerations and expectations of growth. There is also a lag between when the orders are placed and when the aircraft actually enter service. And it doesn’t mean that all the ordered aircraft will be delivered at the same time.”
Some new orders, he added, were meant for replacements for older aircraft that were less fuel-efficient.
The Edge Financial Daily quoted Brendan Sobie, an analyst at aviation research house Centre for Aviation as saying: “Malaysia is seeing a much faster capacity growth than Singapore this year as all airlines are pursuing strategic expansion. Airlines often expand for strategic reasons, which explains adding capacity in periods or markets that are already oversupplied.”
Sobie has forecast, in his outlook report dated Jan 31, that the total passenger aircraft fleet in Malaysia would grow 11% in 2017. The average passenger growth is likely to reach 15%.
“However, the rapid growth will almost certainly come at the expense of yields and profitability. Malaysia and the broader Southeast Asian market have become extremely competitive, with overcapacity on several major routes,” he said in the report.
Sobie expects “heavy discounting” to fill the additional seats and meet load factor and traffic targets.
“Fares in Malaysia are already very low and yields could decline further, particularly in the second half of 2017, when most of the additional aircraft are slated to be delivered,” he was quoted as saying.
The Malaysian air traveller market grew by 4.5 million passengers or 7% to 67.9 million in 2016, with Malindo Airways capturing the most growth, accounting for 1.9 million or nearly half of the additional passengers, the report said.