Can underperforming SIA ever catch up with stellar Asian carriers?

Fuel hedging woes are the main drag.

The national carrier’s share price has been starkly underperforming its regional peers. Data released today by CMC Markets showed that SIA lags behind regional counterparts such as Cathay Pacific, China Southern Airlines and All Nippon Airways.

According to Nicholas Teo of CMC Markets, SIA’s under-performance is staggering considering that most of these airlines compete in a similar operating environment, and are valued along the same metrics.

He noted that a key drag on SIA’s most recent earnings report was their continued heavy expense on jet fuel. SIA’s fuel-hedging policies did not allow the carrier to enjoy better margins when oil prices declined in the second half of 2014.

“Over time, however, the effects of these hedging contracts should smoothen out, if we assume that the policies remain consistent,” he stated.

This could then provide SIA’s shares a chance to catch up with peers. Cathay Pacific has a similarly aggressive hedging policy for jet fuel, while the Chinese Airlines are not permitted to hedge their fuel expenses.