SIA faces intensified competition from Chinese carriers

They are expanding into long-haul sectors.

Aside from weakening yields amid tepid global economic outlook, Singapore Airlines (SIA) braces for more competitive landscape with Chinese carriers spreading their wings into long-haul routes, warns OCBC Investment Research.

"We believe competition is likely to continue to intensify as the Chinese carriers continue to expand onto long-haul routes (e.g. China-North America routes), as seen on their expansion on China-Southwest-Pacific routes," it said.

Furthermore, the research house said that with uncertainties cast over global economic outlook post-Brexit vote, it believes demand for air travel will likely remain muted, and continue to exert pressure on the already deteriorating yields.

SIA's 1HFY17 revenue declined 3.6% YoY to S$7.31b as downward pressure on yields persisted while operating expenses fell 4.6% YoY to S$7.0b mainly on lower net fuel cost.

1HFY17 passenger yields declined across all SIA portfolio airlines except for Tigerair, which came in flat. Consequently, with fuel savings not enough to offset the declining yields, and stripping out one-off items, SIA's 1HFY17 plunged 40.6% YoY to S$122.3m.