Changi Airport Group (CAG) recently expanded incentive programme to include 50% rebate on landing fees for all non-stop long-haul passenger flights from Sep-14 to Mar-16. We expect SIA to be a large beneficiary of the landing fee rebate as majority of its flights is more than nine hours. Past two months’ operating statistics were also encouraging, especially for SIA’s mainline. Passenger load factor increased 0.9ppt YoY to 81.7% and 0.7ppt to 83.1% for Jul-14 and Aug-14, respectively. With Air New Zealand-SIA alliance commencing sales of codeshare flights from Sep-14 and actual flights to start in Jan-15, we expect to see further improvement to SIA’s PLF from 4QFY15 onwards. We continue to believe the overcapacity issue in the region and competition from Middle-Eastern airlines will continue to cause pricing pressure and thus, supressing the yields of SIA, at least for the next few quarters. Factoring CAG’s programme and recent developments in TS alliance as well as NZ-SIA alliance, we increase our PATMI forecast by 26.3% to S$201.1m for FY15 and 36.1% to S$346.5m for FY16. Hence, we increase our fair value estimate from S$9.97 to S$10.05 and maintain HOLD rating on SIA.
CAG incentives and rebates to benefit SIA
Changi Airport Group (CAG) recently expanded their growth and assistance incentive (GAIN) programme in Sep-14 to include 50% rebate on landing fees for all non-stop long-haul (more than nine hours) passenger flights from Sep-14 to Mar-16. We expect Singapore Airlines (SIA) to be a large beneficiary of the landing fee rebate as majority of its flights is more than nine hours. CAG is also offering S$10 incentive for every incremental departing transit/transfer passenger handled for the same period. Although it is capped at S$3m per airline, we think it helps the Tiger Airways-Scoot (TS) alliance to coordinate their routes and pricing more competitively and we expect improved performance from Scoot from 1HFY16 onwards.
Improving load factor amid uncertain yield outlook
While passenger traffic (RPK) for SIA mainline was flat YoY for Jul-14 and grew 0.3% for Aug-14, it recorded 1.0% and 0.5% YoY decline in capacity in Jul-14 and Aug-14, respectively. As a result, passenger load factor (PLF) increased 0.9ppt YoY to 81.7% and 0.7ppt to 83.1% for Jul-14 and Aug-14, respectively. With Air New Zealand-SIA (NZ-SIA) alliance commencing sales of codeshare flights from Sep-14 and actual flights to start in Jan-15, we expect to see further improvement to SIA’s PLF from 4QFY15 onwards given that it continues to maintain capacity discipline. SIA Cargo (SIAC) reported improvements to Cargo Load Factor (CLF) in Jul-14 and Aug-14 while SilkAir reported mixed statistics as it slows down expansion. Although overall load factor of SIA improved over the past two months, we believe the overcapacity issue in the region and competition from Middle-Eastern airlines will continue to cause pricing pressure and thus, suppressing the yields of SIA at least for the next few quarters.
Increase FV estimate; maintain HOLD
Factoring CAG’s GAIN programme and recent developments in TS alliance as well as NZ-SIA alliance, we increase our PATMI forecast by 26.3% to S$201.1m for FY15 and 36.1% to S$346.5m for FY16. Hence, we increase our fair value estimate from S$9.97 to S$10.05 and maintain HOLD rating on SIA.
Changi Airport Group (CAG) recently expanded their growth and assistance incentive (GAIN) programme in Sep-14 to include 50% rebate on landing fees for all non-stop long-haul (more than nine hours) passenger flights from Sep-14 to Mar-16. We expect Singapore Airlines (SIA) to be a large beneficiary of the landing fee rebate as majority of its flights is more than nine hours. CAG is also offering S$10 incentive for every incremental departing transit/transfer passenger handled for the same period. Although it is capped at S$3m per airline, we think it helps the Tiger Airways-Scoot (TS) alliance to coordinate their routes and pricing more competitively and we expect improved performance from Scoot from 1HFY16 onwards.
Improving load factor amid uncertain yield outlook
While passenger traffic (RPK) for SIA mainline was flat YoY for Jul-14 and grew 0.3% for Aug-14, it recorded 1.0% and 0.5% YoY decline in capacity in Jul-14 and Aug-14, respectively. As a result, passenger load factor (PLF) increased 0.9ppt YoY to 81.7% and 0.7ppt to 83.1% for Jul-14 and Aug-14, respectively. With Air New Zealand-SIA (NZ-SIA) alliance commencing sales of codeshare flights from Sep-14 and actual flights to start in Jan-15, we expect to see further improvement to SIA’s PLF from 4QFY15 onwards given that it continues to maintain capacity discipline. SIA Cargo (SIAC) reported improvements to Cargo Load Factor (CLF) in Jul-14 and Aug-14 while SilkAir reported mixed statistics as it slows down expansion. Although overall load factor of SIA improved over the past two months, we believe the overcapacity issue in the region and competition from Middle-Eastern airlines will continue to cause pricing pressure and thus, suppressing the yields of SIA at least for the next few quarters.
Increase FV estimate; maintain HOLD
Factoring CAG’s GAIN programme and recent developments in TS alliance as well as NZ-SIA alliance, we increase our PATMI forecast by 26.3% to S$201.1m for FY15 and 36.1% to S$346.5m for FY16. Hence, we increase our fair value estimate from S$9.97 to S$10.05 and maintain HOLD rating on SIA.
No comments:
Post a Comment