Overview of Singapore Airlines Ltd

Singapore Airlines Ltd (SIA) is Singapore’s flagship carrier, known for its extensive network of over 130 destinations across 30 countries before the pandemic. The company has frequently been recognized as one of the best airlines globally by various ranking agencies and publications.

SIA’s stock performance has been under scrutiny, with a share price of S\$6.27 and a target price set at S\$5.80, reflecting a downside of 7.4%. The company is currently trading at 1.18x FY26F Price-to-Book (P/B) ratio, which is 0.5 standard deviations above its historical mean.

Key Highlights

• Recommendation: Maintain SELL
• Target Price: S\$5.80
• Major Shareholders: Temasek Holdings with 53.6% ownership
• Market Capitalization: S\$18,642.4 million
• 52-week High/Low: S\$7.58 / S\$5.95

Performance Analysis

Passenger Operations

Passenger operations showed a robust recovery in December 2024, with passenger capacity reaching 99.9% and passenger load at 101.0% of pre-pandemic levels. The passenger load factor stood at 88.5%, which is 0.9 percentage points above pre-pandemic levels. Key drivers included increased capacity and strong seasonality.

Cargo Operations

Cargo operations underperformed relative to expectations. While cargo capacity reached 101.8% of pre-pandemic levels, cargo load was at 92.3%, and the cargo load factor dropped to 53.6%, which is 5.5 percentage points below pre-pandemic levels. This decline is partially attributed to changes in the competitive landscape for air cargo, with freighter fleets gaining market share over passenger aircraft belly-hold cargo capacity.

Network Recovery

SIA’s network continued to expand, with Scoot launching services to Phu Quoc, Vietnam, and SIA resuming direct seasonal flights to Sapporo, Japan. The passenger network now covers 129 destinations, compared to 137 destinations pre-pandemic.

Financial Performance

3QFY25 Earnings Forecast

The company is expected to deliver core earnings of S\$500 million to S\$600 million for 3QFY25, which represents a significant quarter-on-quarter rebound from S\$290 million in 2QFY25. This recovery is attributed to seasonality benefits and a decline in jet fuel prices. However, the year-on-year comparison indicates a moderate decline from S\$659 million in 3QFY24 due to lower passenger yields.

Key Financials

Industry Outlook

The Singapore aviation sector is expected to transition from recovery to growth in 2025, with Changi Airport’s passenger and cargo traffic already at 99% of pre-pandemic levels. Mid-single-digit year-on-year growth is forecasted for both passenger air traffic and cargo volumes, driven by continued recovery in international travel and rising e-commerce demand.

Challenges remain, including supply chain disruptions affecting aircraft deliveries, geopolitical tensions, and potential macroeconomic headwinds. However, the supply-demand balance is expected to remain relatively tight, which could slow the moderation of passenger and cargo yields.

Valuation and Recommendation

UOB Kay Hian maintains a SELL recommendation for Singapore Airlines Ltd, citing its current valuation of 1.18x FY26F P/B as unsustainable. The target price is set at S\$5.80, based on a 1.10x FY26F P/B, which aligns with its historical mean. Despite the airline’s strong operational performance, earnings are expected to moderate in the near to medium term.

Key Risks

• A weaker-than-expected macroeconomic environment that could dampen air travel demand.
• Potential U.S. tariff hikes impacting global air cargo volumes.
• Geopolitical tensions that could lead to fuel price shocks.