Overcapacity woes still drag SIA’s yields despite new alliances and incentives

Pricing pressures continue for the national carrier.

In spite of new incentives rolled out by the Changi Airport Group and new codeshare alliances with other carriers, Singapore Airlines continues to be dogged by regional overcapacity and stiff competition from Middle Eastern carriers.

According to OCBC, SIA is set to benefit from CAG’s expanded incentive programme that includes 50% rebate on landing fees for all non-stop long-haul passenger flights from Sep-14 to Mar-16.

“We expect SIA to be a large beneficiary of the landing fee rebate as majority of its flights is more than nine hours,” noted the report.

SIA’s Air New Zealand alliance is another bright spot, as the partnership will commence its first flight on January 2015.

“We continue to believe the overcapacity issue in the region and competition from Middle-Eastern airlines will continue to cause pricing pressure and thus, supressing the yields of SIA, at least for the next few quarters. Factoring CAG’s programme and recent developments in TS alliance as well as NZ-SIA alliance, we increase our PATMI forecast by 26.3% to S$201.1m for FY15 and 36.1% to S$346.5m for FY16,” stated OCBC.