Singapore Air Transport Mar 24 - Trickling into a seasonally lulled quarter

3 Apr 2024
  • Another weak month for the Singapore air transport sector, as the valuation disparity has drawn investors to HK/China-listed peers. China was the last country to lift border restrictions, and HK/Chinese carriers, such as Cathay Pacific, are catching up on volume and profitability (Figure 5).
  • SIA passenger load factor fell again in Feb 24 (Figure 1). Cargo volume also declined after the short spike in Jan from CNY and the Red Sea conflict (Figure 2). It was a similar trend for passenger and airfreight volume at the Changi Airport (Figure 3 & 4).
  • We are UNDERWEIGHT on air transportation.



Jet fuel prices climbed 12.4% YTD (Figure 6) as demand rose in tandem with air travel recovery in Asia. The sanctions imposed on Russia by the EU and UK reduced the supply and raised the price of diesel. Complex refineries that can adjust production would prioritise diesel output over jet fuel, thus curbing jet fuel supply and lifting prices.


The merger of Air India and Vistara received the conditional approval from the Competition and Consumer Commission of Singapore. The two airlines undertake to maintain flight capacity at pre-pandemic levels to address concerns that the combined entity would have a dominant share of some routes between Singapore and major Indian cities. The merger still needs further regulatory and foreign direct investment clearances. SIA will own 25.1% of the combined entity in exchange for its existing 49% stake in Vistara and S$360mn cash. SIA also commits to inject a further S$880mn cash into the JV.


SIA Engineering will exit and write off S$25.1mn from its participation in Pratt & Whitney’s  PW1500G engine Risk-Revenue Sharing Programme (RRSP). Participants are required to share the costs, risks, and revenues of the PW1500G geared-turbofan engine, from its design and development to production (including engine spare parts), post-certification engineering support, marketing and sales, and aftermarket services, including MRO. The exit would cut SIE’s need for further capital injection into the RRSP, but could negatively impact engine capability and engine MRO jobs for 49%-owned Eagle Services Asia Pte Ltd (ESA). ESA contributed S$17mn to SIE’s FY23 pretax profit.



If completed, the merger of Air India and Vistara could result in a non-cash accounting gain of S$1.1bn in SIA’s book (S$0.40/share), we estimate. This has not been included in our FY25e NAV estimate of S$5.91.


The FAA halted the production expansion of Boeing 737 MAX aircraft on Jan 24, potentially reducing the supply of narrow-body aircraft and indirectly raising airlines’ operating costs. Post-pandemic travel demand is skewed towards shorter-haul routes and quick turnarounds, which are better served by narrow-body aircraft with better seats and fuel efficiency.



SIA (SIA SP, REDUCE, TP S$5.91) Costs are expected to rise while airfares are expected to further normalise.

SATS (SATS SP, REDUCE, TP S$2.31): It needs to restructure a further €580mn debt maturing in May 2024.


SIA Engineering (SIE SP, Not Rated): The S$25.1mn write-off related to the RRSP could impact FY24e (Mar) net profit. The exit from the RRSP might also affect ESA’s ability to scale the technology ladder for new engine types

About the author

Peggy Mak
Research Manager

Peggy has been a sell-side equity analyst for 22 years and a fund manager for 15 years.

Latest Reports

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you


This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

This advertisement has not been reviewed by the Monetary Authority of Singapore.  


Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
Tel: (65) 6230 8133 Fax: (65) 65383066