(July 15): Singapore Airlines Ltd reported robust passenger and air cargo demand in June that closed out a strong first quarter.

The number of passengers carried by Singapore Air and its low-cost unit Scoot in the three months through June 30 hit 9.6 million, up 13.8% on the same period of last year and broadly in line with the fourth quarter ended March 31.

Reported by The Edge

 

 

Still, the rebound in air freight rates is deemed as tailwind for the group and should provide some support to the company&rsquo s FY2025 earnings

 

SINGAPORE Airlines (SIA) : C6L +0.28% is expected to deliver much lower earnings for the first quarter of FY2025 to June, based on some analysts&rsquo forecasts.

 

UOB Kay Hian (UOBKH) expects the flag carrier group to generate a net profit of between S$390 million and S$550 million, a year-on-year decline of 25 per cent to 47 per cent from the record quarterly bottom line of S$734 million reported for Q1 FY2024.

 

The analyst, Roy Chen, made the forecast based on SIA&rsquo s April to June operating data and has factored in the expected passenger yield moderation and recent rebound in air freight rates. &ldquo Our estimates have included fuel hedge gains but excluded other possible one-off items such as tax credits.&rdquo

 

Raymond Yap, an analyst at CGS International, has an estimate of about S$490 million for the mainboard-listed airline group&rsquo s Q1 FY2025, about 33 per cent lower than the year-ago period.

 

He explained that the showing would be due to a possible normalisation of the effective tax rate from Q4 FY24&rsquo s low levels, when SIA probably utilised some budget carrier Scoot&rsquo s carry-forward losses.

 

&ldquo We consider this to be a very good result, underlining sustained strength in passenger unit revenue and rising cargo unit revenue on a quarter-on-quarter basis,&rdquo said Yap.

 

The robust demand during the June holidays likely helped sustain SIA group&rsquo s passenger yields, with the year-on-year dip of 1.7 per cent being smaller than that of 3.3 per cent for Q4 FY2024, he pointed out.

 

But Scoot, impacted by flight disruptions stemming from Pratt & Whitney engine issues for its A320neo fleet, will likely report a lower passenger yield, said Yap.

 

UOBKH&rsquo s Chen said: &ldquo We expect SIA&rsquo s passenger yields to continue to moderate in the medium term, driven by increasing competition this will put pressure on SIA&rsquo s profitability.&rdquo

 

The Singapore Airlines (SIA) B747-400F aircraft is one of SIA&rsquo s seven freighters used for delivering essential items around the world. A distinctive feature of the SIA B747-400F freighter is the nose cargo door which can swing upwards, allowing exceptionally long items of over 50m in length to be loaded.

Singapore&rsquo s air freight up 20% in May port&rsquo s box throughput highest this year

Still, the rebound in air freight rates is deemed a tailwind for the group and should provide some support to SIA&rsquo s FY2025 earnings.

 

Freight load has sustained a moderate pace of recovery in the past few months, buoyed by higher e-commerce demand and some demand spillover from ocean shipping amid liner service disruptions to avoid attacks on merchant vessels in the Red Sea and worsened congestion at the Singapore port.

 

The strength in air freight rates may stay throughout the second half of 2024, thereby lending some support to the airline group&rsquo s FY2025 net profit, said Chen.

 

The analyst also raised the earnings estimates for FY2025 by 5.8 per cent, FY2026 by 13.2 per cent and FY2027 by 4.2 per cent to S$3.2 billion, S$1.4 billion, and S$1.3 billion, respectively.

 

The higher earnings forecasts reflect the stronger air freight rates in FY2025 and potentially slower-than-expected passenger yield moderation. Delays in new aircraft deliveries by planemakers Airbus and Boeing may keep the airline industry&rsquo s capacity supply tight for longer.

 

Both Yap and Chen maintained their &ldquo hold&rdquo recommendations for SIA shares, but Chen raised the target price to S$6.43 from S$6.35 while Yap&rsquo s S$6.78 remained unchanged.

 

They were the two out of nine analysts making a &ldquo hold&rdquo call, according to Bloomberg, while there were two &ldquo sell&rdquo and &ldquo buy&rdquo recommendations each.

 

SIA will report Q1 financials on Jul 31 after market close.

Demand driven by mid-year school holidays and summer travel season

 

SINGAPORE Airlines (SIA) Group posted 7.2 per cent year-on-year growth in passenger traffic in June, with demand driven by the mid-year school holidays and summer travel season.

 

The national flag carrier and its low-cost airline arm Scoot carried a total of nearly 3.2 million passengers for the month, up 9.7 per cent from the year before, said SIA in its latest operating results on Monday (Jul 15). Passenger capacity increased by 11 per cent.

 

Group passenger load factor clocked in at 87.4 per cent in June, with SIA and Scoot posting monthly passenger load factors of 87.1 per cent and 88.7 per cent, respectively.

 

Cargo operations saw a load factor of 58 per cent, up 6.4 percentage points from the year before.

 

Meanwhile, cargo loads rose by 24.9 per cent year on year, which SIA attributed to &ldquo robust e-commerce demand, some demand spillover resulting from disruptions to sea freight, and port congestion&rdquo . This outpaced the capacity expansion of 11 per cent for the same period.

 

Demand for air travel remained robust across all route regions in June. During the month, SIA and Scoot launched new services to London&rsquo s Gatwick Airport and Sibu, respectively.

 

As at the end of June, SIA Group&rsquo s passenger network covered 125 destinations in 36 countries and territories. SIA served 78 destinations, while Scoot served 69 destinations. The cargo network comprised 129 destinations in 37 countries and territories.

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