Malaysia’s islands Penang and Langkawi need home-based airlines to grow and compete
Penang and Langkawi, two of Malaysia’s most popular island destinations, are in need of improved airline connectivity. Analysis from BAA & Partners calls for the establishment of home-based carriers that can better support continued growth and strengthen the competitiveness on the regional destination map.
Located on Malaysia’s northwest coast, Penang and Langkawi are well-known destinations for international tourists. Penang is recognised as a cultural and culinary hub, while Langkawi – an archipelago of 99 islands – is better known for its beaches, luxury resorts, and natural landscapes.
Over the past decade, tourist arrivals to both Penang and Langkawi have grown strongly (excluding the Covid-19 period). Penang International Airport recorded 8.3 million passengers last year, making it the country’s second-busiest airport, while Langkawi International Airport handled 2.9 million passenger movements in 2025. For comparison, Malaysia’s largest airport, Kuala Lumpur International Airport, recorded 63.4 million passengers.
Yet the report from BAA & Partners argues that the islands should not take future passenger growth for granted. In an increasingly competitive regional tourism landscape, ASEAN destinations are intensifying their competition against Penang and Langkawi. In this context, the role of airports as critical entry points is becoming increasingly important – and this is where Penang and Langkawi risk falling behind.
“Currently, neither Penang nor Langkawi has a single airline that calls it home,” said Linus Benjamin Bauer, Founder of BAA & Partners. “That means that every flight, every route, and every capacity decision affecting these islands is made by carriers headquartered in Kuala Lumpur – optimising for their own hub networks, not for the economic development priorities of Penang or Langkawi.”
Bauer gives an example: “Currently, 30 airlines serve Penang, connecting it to 34 cities with 335 international flights per week. But all of this capacity is allocated by external operators. When AirAsia, Malaysia Airlines or Batik Air evaluate whether to add a new frequency or launch a new route from Penang, the decision is filtered through the lens of Kuala Lumpur’s network economics – not Penang’s own strategic priorities.”
In Langkawi, the situation is broadly similar. Its airport, which was named the ‘Best Airport in Asia Pacific’ by Airports Council International last year, is still largely dependent on seasonal charter operations and a limited number of scheduled services from Kuala Lumpur, Singapore, and select Chinese cities.
According to Bauer, it is clear that “without dedicated airline operators anchored in both economies, the islands risk losing ground to better-connected competitors across the ASEAN region.”
“A home-based carrier operating year-round scheduled services to key feeder markets – such as Singapore, Bangkok, Hong Kong, and select Chinese and Indian cities – could transform the islands from a seasonal destination into a year-round premium tourism economy,” he added.
Business travel
The cases of Penang and Langkawi also extend into the business segment, though this is far more pronounced in Penang. The state has developed into one of Southeast Asia’s most established industrial hubs, underpinned by a thriving semiconductor manufacturing ecosystem anchored by global players such as Intel, AMD, and Broadcom.
Over time, this ecosystem has evolved into a deep supply chain network spanning design, assembly, testing, and advanced electronics manufacturing, earning Penang a reputation as a critical node in the global semiconductor value chain.
Beyond electronics, Penang has also built a strong position in medical tourism, supported by relatively advanced private healthcare infrastructure, competitive costs, and English-speaking medical professionals.
One key area of focus for Penang is expanding its role in hosting conferences and business events, particularly as parts of the Gulf region have become less attractive due to geopolitical tensions. “The Penang Convention and Exhibition Bureau is targeting 26 international events in 2026 and 2027, each bringing more than 1,000 delegates,” noted Bauer.
However, Penang is not bidding in a vacuum. “Indeed, it competes against Singapore, Bangkok, Bali, Da Nang, and Chiang Mai – all of which have at least two home-based carriers that can guarantee direct connectivity, offer delegate fare packages, and co-brand with convention bureaux on bid submissions.”
The missing piece of the puzzle
BAA & Partners describes the lack of a home-based carrier as a “missing piece” in the puzzle. “Penang and Langkawi are winning tourists over due to the unique nature of their destinations, but they are missing the one piece of infrastructure that transforms an airport from a facility into an economic engine: a home-based airline.”
Bauer emphasises that the solution should not be found in “launching another low-cost carrier, because Malaysia already has those. What Penang and Langkawi need are purpose-built regional carriers – boutique operators offering premium products on routes that Kuala Lumpur-based airlines will never prioritise, because those routes do not feed the Kuala Lumpur hub.”
“A Penang-based carrier flying direct to Kochi, Osaka, Hanoi, and Bali serves Penang’s economy. A Langkawi-based carrier connecting to Hong Kong, Shanghai, and Mumbai year-round transforms a seasonal island into a twelve-month destination.”
“The question is not whether Penang and Langkawi can attract passengers – they already do. The question is whether Malaysia is prepared to let its island economies compete with one hand tied behind their back, or whether it will create the conditions for home-based carriers to emerge and anchor the next phase of growth.”
