Singapore Airlines’s (SIA) 2Q13 financial results saw a marginal top-line improvement despite the challenging operating environment. The group’s revenue grew 2.5 % YoY to S$3.8b on the back of higher number of passengers carried although its operating expenses (higher jet fuel costs and variable costs associated with capacity growth) grew at a faster pace and resulted in a decline in operating profit to S$70.4m (-42.7% YoY). The group also announced an interim dividend of 6 S cents per share versus 10 S cents declared over the same period last year. Looking ahead, while weaknesses still persist in its cargo business, a series of prior announcements regarding fleet expansion for the Group seem to signal management’s optimism for clear skies. Comparing SIA’s operating statistics with that of the industry (i.e. IATA), we concur with this assessment as the data does show a relatively better performance in light of weak demand. Maintain HOLD at an unchanged fair value estimate of S$10.85.
Marginal improvement despite decline in operating profit
Singapore Airlines (SIA) saw a marginal top-line improvement in 2Q13 despite the challenging operating environment. The group’s revenue grew 2.5 % YoY to S$3.8b on the back of higher number of passengers carried. However, SIA’s operating expenses grew 4.1% YoY to S$3.7b, outpacing its revenue growth and resulted in a decline in operating profit to S$70.4m (-42.7% YoY). A 2.1% QoQ increase in 2Q13’s average fuel cost (according to Bloomberg’s JETKSIFC index) and other variable cost increases in line with its capacity growth partially explained the retreat in operating profits. The group also announced an interim dividend of 6 S cents per share versus 10 S cents declared over the same period last year.
Yields stable as expected
Although yields fell 2.6% YoY following the success of SIA’s promotional fare strategy, passenger yields remained stable on a QoQ basis as expected. Looking ahead, with passenger traffic growing slowly, it remains essential for SIA to manage capacity to minimize further downward pressures on passenger yields for 2H13.
Cargo still weak but capacity reduced going forward
SIA Cargo’s operating loss widened slightly to S$50m on a QoQ basis as industry-wide difficulties surrounding cargo traffic persisted. To help mitigate the weaknesses in demand for cargo, SIA will park one of its 13 freighters (Boeing 747) for more than a year.
Decent performance vs. industry continues
For the first eight months of the year, SIA saw demand via passenger kilometres (RPK) increase 7.6% YoY while passenger capacity (ASK) grew 4.7% YoY correspondingly. This contrasted favourably with overall industry figures from the International Air Transport Association (IATA), which revealed a growth in demand (RPF) of 5.7% YoY against a capacity expansion of 4.3% YoY. However, SIA’s slightly higher capacity base led to a lower passenger load factor (PLF) of 79.0% versus an industry-wide average of 79.5%.
Maintain HOLD
Ahead of the results briefing on the morning of 5 Nov, we deem SIA’s results to be decent and the recent announcement on fleet expansion seem to signal optimism for clearing skies. Maintain our fair value estimate of S$10.85/share and HOLD rating on SIA.
Singapore Airlines (SIA) saw a marginal top-line improvement in 2Q13 despite the challenging operating environment. The group’s revenue grew 2.5 % YoY to S$3.8b on the back of higher number of passengers carried. However, SIA’s operating expenses grew 4.1% YoY to S$3.7b, outpacing its revenue growth and resulted in a decline in operating profit to S$70.4m (-42.7% YoY). A 2.1% QoQ increase in 2Q13’s average fuel cost (according to Bloomberg’s JETKSIFC index) and other variable cost increases in line with its capacity growth partially explained the retreat in operating profits. The group also announced an interim dividend of 6 S cents per share versus 10 S cents declared over the same period last year.
Yields stable as expected
Although yields fell 2.6% YoY following the success of SIA’s promotional fare strategy, passenger yields remained stable on a QoQ basis as expected. Looking ahead, with passenger traffic growing slowly, it remains essential for SIA to manage capacity to minimize further downward pressures on passenger yields for 2H13.
Cargo still weak but capacity reduced going forward
SIA Cargo’s operating loss widened slightly to S$50m on a QoQ basis as industry-wide difficulties surrounding cargo traffic persisted. To help mitigate the weaknesses in demand for cargo, SIA will park one of its 13 freighters (Boeing 747) for more than a year.
Decent performance vs. industry continues
For the first eight months of the year, SIA saw demand via passenger kilometres (RPK) increase 7.6% YoY while passenger capacity (ASK) grew 4.7% YoY correspondingly. This contrasted favourably with overall industry figures from the International Air Transport Association (IATA), which revealed a growth in demand (RPF) of 5.7% YoY against a capacity expansion of 4.3% YoY. However, SIA’s slightly higher capacity base led to a lower passenger load factor (PLF) of 79.0% versus an industry-wide average of 79.5%.
Maintain HOLD
Ahead of the results briefing on the morning of 5 Nov, we deem SIA’s results to be decent and the recent announcement on fleet expansion seem to signal optimism for clearing skies. Maintain our fair value estimate of S$10.85/share and HOLD rating on SIA.
No comments:
Post a Comment