SIA turns to non-flagship brands to boost profits

SilkAir and BAH could offset weakness in SIA's flagship business.

Singapore Airlines' flagship brand has historically been the airline's main profit source, accounting for 62-99% of the its earnings before interest and taxes (EBIT) over the last five years.

It was especially helpful during the time when SIA Cargo became loss-making in those years, DBS Group Research said.

During the group's FY 2017, the flagship brand contributed $386m in EBIT while SIA Engineering’s EBIT contribution was $72m. Meanwhile, SilkAir, Scoot and Tigerair contributed an
aggregated EBIT of $168m in FY17.

However, there could be a turnaround this time, given that SIA’s flagship passenger brand has not grown its capacity in the last three years.

"While we project the flagship brand’s EBIT to decline in 2018F, we expect to see SilkAir and Budget Aviation Holdings (BAH) continue to improve their contributions, somewhat offsetting the weakness in SIA’s flagship business," DBS Group Research said.