Analysts remain bearish on SIA as yield, demand woes persist

Rival airlines have been aggressively boosting capacity.

Low fuel costs may have launched Singapore Airlines (SIA) into the red in 1Q17, but yield and demand pressures continue to haunt the airline's core earnings.

According to a report by CIMB, SIA’s Q1 figures would have been much better without a pullback in loads and the fifth straight quarterly yield decline.

Moreover, the future for SIA mainline remains murky. The official guidance for SIA mainline stayed pessimistic, indicating fierce competition, aggressive capacity injection by rival airlines, geopolitical concerns in markets like France and Turkey, as well as yield pressures.

Additionally, declining yields may further haunt SIA’s cargo business. CIMB noted that tepid global economic growth as well as overcapacity in the global airfreight markets could extend SIA Cargo’s troubles for several more quarters.

CIMB also revealed that SIA’s efforts to build new connectivity by flying more economically to long and thin routes with its four A350-900 XWBs are longer-term plays, which may not yield immediate returns.

Photo: IanC66/Shutterstock.com

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