Singapore Airlines

[ishak]

Lower oil price offsets weaker demand
18 Sep 2008

BUY S$14.92
Price Target : 12-Month S$ 19.00
Reason for Report : Company Update
Potential Catalyst: Demand remains firm; oil price declines.

Story: Amidst higher risk of a global economic recession and falling oil prices, we lower our load factor assumptions for SIA’s passenger airline business but also our fuel price assumptions.

Point: Our base case assumptions for SIA in terms of load factor is 76.5% for FY09 and 75% for FY10, whilst in terms of average jet kerosene price, our assumption is US$125 per barrel for FY09 and US$115 per barrel for FY10. This means that whilst we have lowered our load factor expectations for SIA in view of slowing global demand, we have also lowered fuel cost assumptions for SIA as oil prices continue to weaken. Net-net, this leaves our FY09 and FY10 earnings estimates largely unchanged. Our scenario analyses show that any loss in earnings from a decline in load factor is likely to be mitigated by some decrease in fuel costs from lower jet kerosene prices. Each ppt decrease in load factor can be offset by a decline in jet kerosene price of US$7.50 per barrel. Unless we come to a scenario where oil prices move back to over US$150 per barrel, whilst load factors for SIA’s passenger airline business drops to 72% or less, the Group should continue to remain profitable. We see this as highly unlikely since this would require very high prices amidst a global economic recession.

Relevance: We maintain our BUY call and S$19 target price for SIA, based on 6x EV/EBITDA, its eight-year trading average. The stock is also offering an attractive net dividend yield of >6.5% as we believe that SIA can continue with its total annual dividend of S$1, given that that it represents about three-quarters of earnings and that it has a net cash position of over S$3 per share.

[ishak]

International passenger traffic growth eased further in Aug to 1.3%
CNA, 30 Sep 2008

The International Air Transport Association (IATA) reported an easing of international passenger demand growth in August to 1.3 per cent, following a sudden slowdown to 1.9 per cent in the previous month.

The Asia Pacific region alone saw a 3.1 per cent drop in passenger traffic during the period.

The drop was mainly due to slowing economies in the region and the current global financial crisis.

IATA said traffic advanced by 5.4 per cent in the first half of the year, but the sudden decline which began in July is weighing down on carriers.

It expects the global airline industry to post a US$5.2 billion loss for 2008.

International freight traffic also fell by 2.7 per cent in August for the third consecutive month. And Asia Pacific, which accounts for 45 per cent of global air cargo markets posted a 6.8 per cent drop.

[winston]

RESEARCH ALERT-Macquarie starts Singapore Air at "underperform"

SINGAPORE, Oct 3 (Reuters) - Macquarie has started coverage of Singapore Airlines with an "underperform" rating and a target price of S$12.20, citing extended weakness in demand for air travel.

"We expect a prolonged downturn in premium corporate demand as weakness in the financial sector persists through 2009," analysts Tim Bacchus and Joy Shen said in a note.

"Further, 45 percent of Singapore Airlines' total passenger sales are sold in weakening U.S., Europe, Australasia markets." Macquarie's target price of S$12.20 represents a 17 percent downside to Singapore Airlines closing price of S$14.76 on Thursday.

[winston]

Not vested. From UOB-Kay Hian:-

Top SELL
SIA: Fair: S$14.30

− There is a strong possibility that the stock could trade towards its book value of S$12.90 for the following reasons:-

− Clear signs of slowdown in Asia-Pacific region. The International Air Transport Association (IATA) reported that cargo traffic in the Asia-Pacific region fell 6.8% in August, the sharpest decline in more than three years. This is not a blip, but the third consecutive decline since June, illustrating a slowing Asian economy. This is especially significant, as Asia-Pacific cargo demand accounts for 45% of global air cargo market.

− International passenger traffic growth slows to 1.3% - The IATA data on August passenger traffic is the lowest yoy decline in five years. We believe the decline in corporate travel would be even greater, given the global economic turmoil. SIA is highly dependant on corporate travel and derives 40-45% of its airline revenue from premium travel. This would likely weaken in the coming months.

[millionairemind]

This is going to hurt..

Published October 30, 2008

SIA cuts capacity to Asian cities from falling demand
But airline raises Middle East flights, maintains service on 'kangaroo-route'
By VEN SREENIVASAN

FACED with falling passenger numbers, Singapore Airlines (SIA) has embarked on an aggressive capacity reduction programme which will see cuts in some routes and total pullouts from others.

The airline said that the changes, which are being implemented progressively throughout the five-month-long Northern Winter schedule beginning Oct 26, will 'better match capacity with demand'.

Services to Penang and Ho Chi Minh will be gradually reduced to 18 and 17 weekly flights respectively, while one service to Seoul will be initially reduced, then scrapped completely from Feb 2 to March 28 next year, when the winter season ends. But SIA will continue to operate 17 weekly services to and from the Korean capital during winter.

Osaka will be served once a day from Nov 2 by SQ618 (Singapore-Osaka) and SQ617 (Osaka-Singapore). Flights SQ622 (Singapore-Osaka) and SQ621 (Osaka-Singapore) will be suspended.

Frequencies to Bangalore and Chennai will also be reduced. Meanwhile, the relatively recent service to Amritsar will be dumped from February next year, with passengers booked on flights to the northern Indian city being transferred to SIA's New Delhi service.

Also, from February, SIA will link its Cape Town flights to Johannesburg. The Cape Town extension will operate three flights weekly, while the daily service to Johannesburg will be maintained.

But while cutting intra-Asian flights, SIA has increased services to the Middle East.

The frequency of flights to Istanbul, via Dubai, has been raised to six flights per week from four. SIA will also be introducing flights to Riyadh.

All this comes just two weeks after SIA reported that it had been hit by its first fall in passenger numbers in three years.

The airline's passenger numbers in raw terms dipped 1.6 per cent to 1.51 million last month from a year ago.

Meanwhile, with capacity (measured in available seat kilometres) rising 6.8 per cent during the month, the passenger load factor declined 4.1 percentage points to 76.9 per cent last month.

'In the current operating environment, Singapore Airlines remains committed to providing customers the highest standard of service, while ensuring capacity is allocated carefully to match demand,' the airline said in a statement yesterday. 'Where demand falls, capacity adjustments will be made quickly.'

The airline is now watching its US routes closely, including its new all-business class, non-stop flights to Los Angeles and Newark.

The only service which remains largely unscathed is its 'kangaroo-route' from Europe, through Singapore, to Australia.

But the demand decline is not unique to SIA.

For the first time since the Sars outbreak in 2003, global airline passenger traffic shrank last month, falling 2.9 per cent as the slump in demand outstripped capacity cuts. Asia-Pacific carriers posted a 6.8 per cent drop in demand - the second-biggest after African carriers.

International load factors fell 4.4 percentage points to 74.8 per cent last month, from 79.2 per cent in August, no thanks to the widening economic impact of the global credit crunch.

Instead of celebrating a nearly 50 per cent fall in fuel price, the global aviation industry now finds itself battling a sharp drop in travel demand caused by the global financial meltdown.

According to the International Air Transport Association, at least 30 airlines have gone belly-up in the first nine months of this year, and another 20 are on its watchlist.

SIA's stock tumbled 50 cents to $10.30 yesterday - its lowest level in almost a decade.

[winston]

Singapore Air to cut flights to various Asian cities

SINGAPORE, Oct 30 (Reuters) - Singapore Airlines will cut the number of flights to a number of Asian cities in response to falling demand.

The airline said in a statement that it would reduce the number of flights between Singapore and several cities in Asia including Penang, Ho Chi Minh City, Seoul, Osaka, Bangalore and Chennai. It will stop flights to Amritsar in India.

"Other changes will be made on an ad-hoc basis where demand requires," it said, adding capacity adjustments will be made quickly where demand

[millionairemind]

I am surprised even SIA is resorting to this kind of tactics... times must be really bad

SIA levies US$50 fee on economy exit-row seats
No such charge on short-haul S-E Asia, B777-200ER flights
By NISHA RAMCHANDANI

(SINGAPORE) Following in the footsteps of some US and low-cost carriers, Singapore Airlines said yesterday that economy-class passengers who want exit-row seats with more legroom will have to pay a US$50 fee for each part of their journey.

For instance, customers travelling from Sydney to London via Singapore - SQ222 to Singapore and SQ322 to London - will have to pay US$100.

The move will not apply to short-haul routes within South-east Asia or flights operated by Boeing B777-200ER aircraft as these do not have seats in exit rows.

According to SIA spokesman Stephen Forshaw, the move is about better service - not money. 'There is high demand for those seats,' he said. 'Currently, requests are taken, but there is no way to guarantee the selection of such seats. This is really about offering a service enhancement - it's something that not every customer wants or needs. Those for whom it is important will have the opportunity to purchase the option and guarantee it.'

Revenue from the fee will be very small, he said. This is 'hardly about the money'.

SIA said that other categories of 'preferred' seats may be made available for 'selection'.

Some travellers said yesterday that they would consider paying extra for an exit-row seat on a long flight. But others were hardly enthralled.

'I don't know if I'd pay for it. As it is, you already have to take on the exit row duties in exchange for the extra leg room,' said Lena Quek, marketing manager of eFinancialCareers, adding that the fee also penalises taller passengers who need more space.

Passengers who occupy exit row seats must meet certain requirements, such as being fully able-bodied so that they can open the exit doors quickly in an emergency.

'There's already so much calculated into our air ticket, such as fuel surcharges and taxes,' said Lesley Tan, a lawyer with a foreign firm. 'Now we have to pay for seat selection as well?'

[millionairemind]

November 6, 2008, 5.19 pm (Singapore time)

SIA Q209 net profit falls, maintains dividend
By ANGELA TAN

Singapore Airlines on Thursday said net profit for the second quarter ended September 30, 2008 fell to S$323.8 million compared to S$507.8 million a year ago.

Revenue was higher at S$4.38 billion compared to S$3.97 billion a year ago.

Earnings per share for the quarter is at 27.3 cents, down from 40.8 cents a year ago.

The national carrier has kept its dividend payout at 20 cents a share, unchanged from a year ago.

[winston]

RESEARCH ALERT-Citi slashes Singapore Airlines price target

SINGAPORE, Nov 7 (Reuters) - Citigroup on Friday kept its "sell" recommendation on Singapore Airlines and cut the target price to S$9.00 from S$13.00 as it expects the airline's revenue to be weaker than earlier predicted.

Citigroup analyst Robert Kong said the new forecast reflects lower traffic and yield assumptions and is consistent with the bank's view that the benchmark Straits Times Index <.FTSTI> will fall to 1,500 points.

Shares of SIA, which reported a 36 percent drop in quarterly profit, closed at S$11.40 on Thursday.

[millionairemind]

November 7, 2008, 5.51 pm (Singapore time)

SIA says short haul travel falling

Singapore Airlines on Thursday posted a 36 per cent fall in quarterly profit, dragged down by record jet fuel prices and slowing travel demand.

Singapore Air has seen declining passenger demand this year as the global economic slowdown crimps corporate and leisure travel, forcing it to announce a cut in flights from the city-state to other Asian cities. -- REUTERS