Singapore Airlines shaken by depressing number of business travellers

Cost-cutting among companies leave the airline wounded.

Singapore Airlines (SIA) is in for major headwinds as its yields are likely to be affected by oil prices and uncertainties in the corporate travel market.

According to UOB KayHian analyst K Ajith, the layoffs and moves being done by corporates to conserve cash could affect the travel market and hurt SIA.

"This is likely to affect Singapore Airlines and Cathay Pacific as some 30% of their pax revenue is attributed to corporate travel," he said

Meanwhile, he noted that average return fare has declined 20% since mid-2015 even as fuel prices rebound.

"Yields for Southeast Asian full-service carriers have declined by an even greater quantum due to heightened competition from low-cost carriers (LCCs) which have a greater than 50% market share of intra-Asia seat capacity," the analyst said.

With this, Ajith said only China and Thailand are likely to see yields stabilise or even improve, especially if crude oil prices rise.

"We believe SIA and CX face structural challenges at their respective hubs and that valuations will remain depressed until yields start creeping up, which is likely to happen only if fuel prices rebound." he explained.