SINGAPORE (Jan 16): UOB Kay Hian is maintaining its "buy" on Singapore Airlines with $11.90 target price given the group's passenger and cargo load factors improved significantly in December as load factors for the parent airline and SIA cargo hit the highest in 10 years.
See: SIA Group total passenger load factor in Dec up 1.8 ppt to 84.7%
Passenger traffic growth continued to outpace seat capacity growth across all sectors, and yields should improve as a result. Improved passenger yields and higher load factors should lead to a better profit in 3Q18.
December also marks SIA parent airline’s ninth straight month of load factor improvement.
"We believe the strong growth in load factors coupled with increasing yields will result in better 3Q18 earnings," says analyst K Ajith in a Tuesday report.
Flag carrier Singapore Airlines’ passenger load factor rose 1.9 ppt y-o-y in Dec 2017 to the highest in more than 10 years driven by higher passenger demand across all regions with little change in seat capacity. In 3Q18, SIA's load factor grew 2.6 ppt y-o-y while passenger traffic grew 4.2 ppt y-o-y.
Regional carrier SilkAir saw double-digit y-o-y growth across all metrics in Dec 2017. Passenger carriage -- led by an increase in demand to/from China and Southeast Asia -- outpaced capacity growth. Dec load factor was also the highest in five years. For 3Q18, SilkAir’s passenger load factor increased 3.5 ppt y-o-y.
Budget Aviation Holdings (BAH), which consists of low-cost carriers Scoot and SilkAir, saw its load factor increased 1ppt y-o-y and was at its highest since 2014 as passenger demand continued to grow during the year-end peak. In 3Q18, BAH’s load factor grew by 5 ppt, the most significant improvement in load factor across all sectors.
SIA’s cargo load factor at 88.7% was at its highest in more than 10 years as demand outpaced capacity changes. The strongest load factor improvement was in Europe and in the West Asia and Africa region, which helped to offset a 5 ppt decline in loads to the Americas. In 3Q18, cargo load factor increased 2.4 ppt y-o-y as cargo traffic grew 4.4 ppt y-o-y.
Shares in SIA are down 4 cents at $11.03 or 20.8 times FY18 earnings.
SIA’s cargo load factor at 88.7% was at its highest in more than 10 years. Cargo traffic grew 4.3% y-o-y as demand outpaced capacity changes. The strongest load factor improvement was in Europe and in the West Asia and Africa region, which helped to offset a 5 ppt decline in loads to the Americas. In 3Q18, cargo load factor increased 2.4 ppt y-o-y as cargo traffic grew 4.4 ppt y-o-y.
Shares in SIA are down 4 cents at $11.03 or 20.8 times FY18 earnings.
