Singapore Airlines (SIA) reported its Dec 2011 operating statistics. The parent airline’s passenger capacity (ASK) increased by 3.2% YoY while its passenger traffic (RPK) gained a smaller 1.8% YoY, resulting in passenger load factor (PLF) falling to 79.6%, compared to 80.7% in Dec 2010. With its ASK already up 3.3% YoY in 3QFY12, SIA is unlikely to achieve management guidance of 2HFY12 ASK similar to that of 1HFY12. We maintain our fair value estimate of S$10.85/share, which has already factored in the challenging times the aviation sector is currently facing, and HOLD rating on SIA.
December 2011 operating statistics.
Singapore Airlines (SIA) last night reported its Dec 2011 operating statistics. The parent airline’s passenger capacity (ASK) increased by 3.2% YoY while its passenger traffic (RPK) gained a smaller 1.8% YoY. As a result, it recorded a passenger load factor (PLF) of 79.6%, compared to 80.7% a year ago. SilkAir’s RPK again gained a strong 7.6% YoY but it recorded an even faster ASK growth of 9.3% YoY. Thus, SilkAir’s PLF also fell to 83.1%, lower than the 84.5% in Dec 2010. SIA Cargo’s freight capacity (AFTK) grew 1.3% YoY and its freight traffic (FTK) edged ahead by 1.5% YoY. SIA Cargo’s freight load factor (FLF) improved marginally to 63.6%, from 63.5% in Dec 2010.
Falling passenger load factor caused by faster capacity growth.
At the 2QFY12 results briefing, management guided that SIA’s ASK in 2HFY12 should be similar to that of 1HFY12. This can be achieved if ASK does not grow more than 1.5% YoY in 2HFY12 but it is looking unlikely since ASK is already up 3.3% YoY in 3QFY12. At this point, SIA needs reduce the parent airline’s ASK by 0.5% YoY in 4QFY12 in order to achieve management’s guidance.
Persistently high jet fuel prices mean depressed margin.
In 3QFY12, jet fuel prices (JETKSIFC Index) adjusted to SGD averaged 4% higher than in 2QFY12. Since fuel cost is the single largest contributing factor to total operating expenses, persistently high jet fuel prices are likely to continue depressing the parent airline’s profit margin, especially when PLFs have been falling YoY since Aug 2010.
Maintain fair value of S$10.85 and HOLD.
We maintain our fair value estimate of S$10.85/share, which has already factored in the challenging times the aviation sector is currently facing, and HOLD rating on SIA.
Singapore Airlines (SIA) last night reported its Dec 2011 operating statistics. The parent airline’s passenger capacity (ASK) increased by 3.2% YoY while its passenger traffic (RPK) gained a smaller 1.8% YoY. As a result, it recorded a passenger load factor (PLF) of 79.6%, compared to 80.7% a year ago. SilkAir’s RPK again gained a strong 7.6% YoY but it recorded an even faster ASK growth of 9.3% YoY. Thus, SilkAir’s PLF also fell to 83.1%, lower than the 84.5% in Dec 2010. SIA Cargo’s freight capacity (AFTK) grew 1.3% YoY and its freight traffic (FTK) edged ahead by 1.5% YoY. SIA Cargo’s freight load factor (FLF) improved marginally to 63.6%, from 63.5% in Dec 2010.
Falling passenger load factor caused by faster capacity growth.
At the 2QFY12 results briefing, management guided that SIA’s ASK in 2HFY12 should be similar to that of 1HFY12. This can be achieved if ASK does not grow more than 1.5% YoY in 2HFY12 but it is looking unlikely since ASK is already up 3.3% YoY in 3QFY12. At this point, SIA needs reduce the parent airline’s ASK by 0.5% YoY in 4QFY12 in order to achieve management’s guidance.
Persistently high jet fuel prices mean depressed margin.
In 3QFY12, jet fuel prices (JETKSIFC Index) adjusted to SGD averaged 4% higher than in 2QFY12. Since fuel cost is the single largest contributing factor to total operating expenses, persistently high jet fuel prices are likely to continue depressing the parent airline’s profit margin, especially when PLFs have been falling YoY since Aug 2010.
Maintain fair value of S$10.85 and HOLD.
We maintain our fair value estimate of S$10.85/share, which has already factored in the challenging times the aviation sector is currently facing, and HOLD rating on SIA.
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