KUALA LUMPUR, Feb 5 — Hong Leong Investment Bank (HLIB) has upgraded the aviation industry outlook to “overweight” on a potential recovery in air travel demand this year.

In a research note today, HLIB said the positive air travel sentiment is backed by the decline in jet fuel price by about 50 per cent to US$60 (RM215.274 ) per barrel.

“The current scenario will also improve airlines’ profitability, given that jet fuel contributes between 40 per cent to 60 per cent of airlines’ cost structure.

“The Asean open skies policy is also a contributing factor to the positive outlook,” HLIB said.

The research house said Malaysia Airlines Bhd’s restructuring will be positive for the aviation industry, in terms of less pressure on yields as demand catches up with the slower system capacity growth.

HLIB has maintained a “buy” call on AirAsia Bhd with unchanged target price (TP) of RM3.15, believing the low-cost carrier will withstand the impacts from yield decline and ringgit depreciation.

It noted that Malaysia Airports Holdings Bhd will benefit from improving air travel sentiment due to the full commencement of Kuala Lumpur International Airport 2 and consolidation of Istanbul Sabiha Gocken Airport earnings turnourd.

“Therefore, we maintain a “buy” call on the airport operator with lower TP of RM8.30,” the reseach house said. — Bernama