I used the Malaga to Fuengirola branch last weekend. I must say the services were very well used at every 20 minutes, I had to stand on a number of services. Has anything other than the EMUs to Malaga run on this branch?
Yes, it's pretty much now at capacity, although still no decision has been made about an onwards extension. There are two different philosophies in play:
1) Extension of the coastal line to Marbella, acting as an extended commuter line and serving all the tourist areas en route. This would almost certainly need double tracking of the line between Malaga and Fuengirola and removal of the viaduct in Fuengirola, although it would also heavily relieve the A-7 coastal (former) motorway.
2) Leaving the coastal line as-is, perhaps with some more improvements to improve the frequency further. Malaga-Marbella-(Algeciras) would then be built as a high speed line, although this makes very little sense without a high speed line onwards to Almeria and Algeciras.
The problem is that none of this makes any sense in isolation. If there is a high speed line to Marbella, then it would have to miss Malaga unless the train is reversed there. One alternative would be to build Malaga-Almeria, but the cost of Algeciras-Almeria would be astronomical due to the terrain. I'm also not convinced it's needed: I can't imagine a lot of demand for high speed journeys along the coast.
Another alternative is to build the LAV to Marbella and Algeciras, but then build a new high speed station at Malaga Airport instead. Algeciras/Marbella trains could then call at Malaga Airport, and Marbella/Malaga-Granada-Almeria would be served via the transversal line.