Singapore Airlines' net cash grows to over $5bln

Continued improvement in passenger yield (+15%yoy, +3% qoq) was the key growth driver for the flag carrier’s 58% yoy jump in operating profit for 3Q11.

In a statement, DBS Bank said the airline’s profit was also bolstered by positive performances from SIA Engineering (+55% to S$34m), SIA Cargo (+20% to S$48m) and Silkair (+96% to S$45m).

“While overall carriage only rose 2.3%, overall yield improvement of 10.5% helped improve margins significantly,” the bank said.

SIA also reported PATMI for the same quarter of S$288m includesS$199m of fines on SIA Cargo, offset by recognition of S$45m in liquidated damages.

DBS said that SIA, whose balance sheet has improved to a net cash position of over S$5bn (over S$7bn gross cash), has a number of options to enhance shareholder value now that it is awash with cash.

“In order to improve its ROE (projected to be around 9%-10% in FY11/12), and enhance its shareholder value, we believe SIA could embark on one or more of the following : increase dividend payout to FY07 and FY08 levels of S$1 per share, [and/or] embark on a capital reduction exercise (as in FY08).”

The bank also suggested that SIA could acquire a stake in another airline that could boost its earnings over the medium to long term, and mentioned investing in China Eastern Airlines as a possible venture.