What’s stalling SIA’s take off despite record passenger numbers?

It’s at an all-time best quarterly passenger load factor.

Singapore’s flag carrier has been stellar in improving its load factors so far, improving 1.9ppts to 83.1% in 2QFY16, but it can’t overlook that it’s struggling in an equally important sector.

According to analysts from Maybank Kim Eng, Singapore Airlines’ cargo market failed to mimic the robust growth of its passenger numbers.

“The cargo market was less buoyant as its load factor shrank 1.7ppts YoY to 60.3%. Load factor has been languishing at its 5-year low mark since Apr 2015,” Maybank Kim Eng said.

Despite cargo capacity growing by 2.6%, SIA management pointed to a weak air-freight industry that is currently struggling from overcapacity.

“Load factor is impressive, but this came at the expense of lower yields as competitors cut prices to gain market share and loads. SIA has to reciprocate by dropping its fares but is saddled with expensive fuel hedges: 55% of its fuel in 2QFY16 had been fixed at USD104/bbl vs an average market price of USD66/bbl,” Maybank Kim Eng said.