SINGAPORE Airlines : C6L +1.26% (SIA) recorded a year-on-year, 14.4 per cent rise in group passenger traffic to 12.6 billion for January 2024, it said on Thursday (Feb 15).

 

Within the group, the flagship airline&rsquo s revenue passenger-kilometres rose 14.3 per cent to 9.6 billion from 8.4 billion year on year. Passenger traffic, expressed as revenue passenger-km, indicates the number of passengers carried multiplied by the distance flown.

 

Passenger capacity across the group rose 16.5 per cent on-year to 14.7 billion from 12.7 billion, outpacing January&rsquo s revenue passenger-km due to the shift in the Chinese New Year to February.

 

Consequently, group passenger load factor (PLF) &ndash revenue passenger-km expressed as a percentage of available seat-km &ndash was 85.3 per cent, 1.6 percentage points lower than in the previous year.

 

SIA posted a monthly PLF of 84.2 per cent, contracting 1.7 percentage points Scoot&rsquo s was 89.4 per cent, down 1 percentage point.

 

Both airlines carried a combined 3.2 million passengers in January 2024, rising 23.1 per cent from 2.6 million in January 2023.

 

Group cargo loads soared 19.7 per cent to 469.1 million tonne-km, compared to 391.8 million tonne-km the year before.

 

This was due to stronger e-commerce demand and higher shipments before the Chinese New Year holidays, said SIA.

 

This outpaced the capacity injection of 13.8 per cent from the year before, with the gross capacity for the group coming in at 860.3 million. As a result, cargo load factor, which is cargo load expressed as a percentage of gross capacity, grew 2.7 percentage points to 54.5 per cent, from 51.8 per cent.

 

As at the end of January, the group&rsquo s passenger network covered 121 destinations in 35 countries and territories, with SIA serving 76 destinations, and Scoot, 67. The cargo network comprised 126 destinations in 37 countries and territories, as at end-January

 

Citi Research has turned bullish on Singapore Airlines C6L - (SIA) as analysts Kaseedit Choonnawat, Amy Han and Eric Lau upgraded their call to &ldquo buy&rdquo from &ldquo sell&rdquo . The upgrade comes as the analysts expect the airline to provide a &ldquo strong guidance&rdquo into the summer of 2024 at its results briefing for the 3QFY2023/2024 ended Dec 31, 2023, on Feb 21. SIA will release its results for the quarter after trading hours on Feb 20. At the same time, the analysts have opened an upside 30-day catalyst watch ahead of SIA&rsquo s results announcement.

 

In their Feb 11 report, the analysts note that the airline&rsquo s passenger yield upside is expected to last till summer although they have limited visibility going into the year-end for 2024.

 

That said, they have increased their yield assumption for FY2024, FY2025 and FY2026 to 23%, 16% and 10% respectively above SIA&rsquo s pre-Covid-19 levels, from 22%, 13% and 7% previously.

 

&ldquo While our pax yield revisions appear counterintuitive against industry&rsquo s incremental supply and anecdotal evidence from early reopener&rsquo s demand softness i.e. Turkish Airlines&rsquo negative y-o-y in load factor, the uplifts of ticket price curves are inclining towards SIA&rsquo s demand strength on its key routes rather than industry, as SIA&rsquo s ticket price premiums versus non-stop alternatives are visible up to July 2024 which was not the case a year ago,&rdquo the analysts write in their Feb 11 report.

 

Based on their latest exercise on SIA&rsquo s forward ticket price curves, the analysts found that prices now cover 52% of the airline&rsquo s available seat kilometres (ASK) capacity for March to September 2024, which is up by 47% and 53% for business and economy classes respectively, compared to their ticket bookings exercise in March 2023.

 

In their view, the uplifts in the forward ticket price curves point to passenger yield and earnings upsides for FY2025.

 

The analysts also see potential upside to SIA&rsquo s cargo yield, as they adjust their yield assumptions for FY2024, FY2025 and FY2026 to 36%, 23% and 16% above its pre-Covid-19 levels, up from 36%, 9% and 3% before.

 

&ldquo A combination of sequential demand recovery, China-US&rsquo relatively slow belly-space ramp-up, and potential spillover from Red Sea disruptions lead to our slower cargo yield normalization view,&rdquo the analysts add.

 

With the upside factors in mind, the analysts have also increased their FY2024, FY2025 and FY2026 earnings estimates by 4%, 124% and 167% respectively, sitting about 9%, 46% and 47% above the consensus over the same period. This is mainly to factor in higher overall unit revenue by 1.5%, 6.7% and 6.3% respectively, which is further helped by lower effective jet fuel price of about 7% in FY2025 to FY2026.

As a result, their target price is also raised to $7.72 from $5.74 based on 1.4 times SIA&rsquo s FY2025 P/BV in relation to 14% of its prospective core return on equity (ROE) &ndash from 1.05 times FY2025 P/BV versus an estimated core ROE of 6.3%.