Singapore Airlines gets caught up in global turmoil

Earnings are estimated to plunge by 56%, worsened by jet fuel prices and the unstable European economy.

More sobering news plague SIA as cargo yields decline by about 5% YoY. Segregation of routes between Tiger Airways and Scoot also awaits resolution.

Here's more from Maybank Kim Eng:

Singapore Airlines (SIA) is expected to report a weak set of 4QFY3/12 results, dragged down by ballooning fuel prices. Earnings are forecast to come in at SGD75m, representing a 56% YoY decline. Concerns over jet fuel prices, together with lingering uncertainties in the global economy, in particular Europe, pose strong headwinds to SIA and the aviation sector as a whole. While SIA’s strong fundamentals are not in doubt, there may be a better entry point in the next 6-12 months.

High jet fuel prices are not coming down anytime soon and will continue to plague global airlines in the near future. While SIA’s passenger yields seem to be steadying, cargo yields are showing a decline of about 5% YoY and this could be another roadblock to profitability. Also waiting to be resolved is the segregation of routes between Tiger Airways and Scoot to minimise cannibalisation of passengers. It was recently announced that Scoot would be plying the Singapore-Bangkok route, which Tiger is currently already in.

SIA’s fortunes are closely tied to the cyclical ups and downs of the economy, whether global or domestic. Given the current developments in Europe, the global economy is not yet out of the woods.