SIA struggling to win dogfight versus aggressive Middle Eastern carriers, LCCs

Top line pressure is set to intensify.

The national carrier is struggling to win back passengers from its increasingly aggressive competitors. SIA’s long-haul top line is under pressure from competitive Middle Eastern airlines, while short-haul routes are being snatched up by regional low cost carriers (LCCs).

According to BNP Paribas, top line pressure is going to weigh on SIA’s growth in spite of positives provided by much lower fuel costs.

SIA’s recent decisions to seal new partnerships with other airlines and to further strengthen its relationship with its associate entities are also positive, but BNP Paribas believes that it will take time before investors see a meaningful impact on the airline’s profits.

“The arrival of new, very fuel efficient aircraft in the fleet (e.g. B777-300ER) should reduce fuel and maintenance costs, but overall we believe it will be difficult for the airline to further rein in costs as it is nearing its optimal cost structure. The airline has a very strong balance sheet with negative net debt, which is a very precious asset in the airline industry,” BNP Paribas added.