Meet the slacker arm of Singapore Airlines

SIA Cargo will continue to bleed profits this year and weigh down the troubled airlines, says PhilipCapital.

Cargo loads, which comprise the bulk of SIA Cargo revenues, are in a tailspin due to the conservative production amid a cautious global market.

It should give SIA a relief though that its core passenger yields are proving resilient to the slowdown scare, according to the brokerage firm in a profit results analysis.

Here's more from PhilipCapital:

Stronger than expected passenger yield
The parent airline’s passenger yield for the quarter was stronger than expected largely due to seasonal factors. The sequential uptick in yields of 0.4cents led to stable yield levels as compared to the same period last year. Despite our view of slowing growth in premium class travel, management guided that there was no material difference in product mix between cabin classes. Cargo yields remained weak and declined as compared to the same period last year.

Segmental profits
With the weak cargo yields, SIA Cargo reported its 3rd consecutive quarterly loss and we do not expect the cargo arm to be profitable for the year. The parent airline reported credible operating profits of S$137mn. Segmental contributions from SIAEC & SilkAir declined marginally

Weak forward bookings, cargo growth will not be met
While forward bookings remain weak, management advised that they have yet to observe a sharp fall in demand for the passenger business. SIA’s earlier guidance of 5%y-y growth in passenger capacity remains on track. However, cargo capacity growth target of 8-9% for the year will probably not be met, as capacity injections for the 9 months merely increased by 1.5%.