Singapore Airlines load factor dropped 3.6ppt in December 2010

The lower load factor was attributed to smaller volume of lower fare promotions.

DBS said, despite the lower load factor of 80.7%, SIA passenger carriage grew by 0.4% y-o-y to 7,740m p-km on 4.9% y-o-y growth.

For the first 3 quarters of FYE Mar 11, SIA's passenger carriage has risen by 3.3% on 1.2% increase in capacity and 1.6ppt improvement in load factor to 79.5%.

The cargo side fared better, with 5.1% yoy increase in carriage to 604.5m tonne-km on 4.9% increase in capacity and 0.1ppt improvement in load factor to 63.5%.

For the first 3 quarters of FYE Mar 11, SIA's cargo carriage has risen by 8.5% on 5.9% increase in capacity and 1.5ppt improvement in load factor to 64.4%.

DBS believes that SIA's earnings growth over the next few quarters will be driven by a combination of moderate improvements in traffic and yields, and that potential catalysts for share re-rating have more to do with potential corporate activities including: 1) increase dividend payout to FY07 and FY08 levels of S$1 per share, 2) embark on a capital reduction exercise (like in FY08) or 3) acquire a stake in another airline that could provide a medium to long term boost to its bottom line, 4) spin-off or sale of its 49% stake in Virgin Atlantic which could be worth S$1 per share or more.