Singapore Airlines' 2Q profits could plummet 75%

Blame it on eroding passenger and cargo loads.

Singapore Airlines (SIA) will report its results on 3 November and UOBKayHian expects its earnings to share the same story as that of Cathay Pacific (CX).

The research house estimates 2Q earnings to fall by 75% yoy due to weaker loads across the parent airline and all airline subsidiaries, weak pax yields and steeper cargo losses.

"In the wake of CX’s profit warning, we believe that SIA’s yields could also have been impacted over the past three months. Both carriers are exposed to the financial sector and highly reliant on premium traffic," it said.

CX’s profit warning on 12 October cited deteriorating business conditions since 1H16 and “heavy pressure on yields”.

"It remains to be seen to what extent SIA was also affected by a weakening environment. Should SIA’s pax yields decline by a greater quantum vs 1QFY17’s 3.7% decline, we believe the street
will likely react negatively," it said.

Meanwhile, UOBKayHian earnings will also be dependent on associate Virgin Australia’s performance.

In 1QFY17, losses from associates amounted to a steep S$48m.

"While we have assumed lower associate losses in 2QFY17, SIA’s profitability could vary substantially depending on the degree of Virgin Australia’s losses," it said.