SIA flies into 2016 riding a triple treat of tailwinds

Fuel prices have finally shown semblances of stability.

Singapore’s flag carrier is headed for clearer skies this year, as it is poised to benefit from a triple treat of factors which will likely propel its profitability from the second half up to next year.

According to analysts from UOB Kay Hian, Singapore Airlines’ (SIA) profitability is bound to improve on the back of savings from lower fuel costs, a potentially stable yield and optimistic load factors.

UOB Kay Hian says SIA’s fuel hedges are expected to be added at progressively lower levels, which means every US$10/bbl difference in fuel price will lead to $570m in cost savings for the airline.

“In addition, we believe that pressure on yields is likely to erode in the coming quarters as volatility on fuel prices have narrowed,” UOB Kay Hian said.

Meanwhile, UOB Kay Hian adds that strategic revenue sharing codeshares could also boost both SIA’s traffic and yields.

“In particular, the recent codeshare with Lufthansa should help to fend off competition from the Gulf carriers and enable SIA to tap into Lufthansa’s network to over 20 points in Europe via the Frankfurt, Munich and Zurich hubs. We believe this would boost loads to Europe,” UOB Kay Hian said.