SIA’s Q1 Likely To Show Strong Uptick in Revenue; but Eyes on Costs and Yields

Singapore Airlines, or SIA, reports its fiscal first-quarter (financial year ending March 2023) performance on July 28, and given its operating statistics for the quarter so far, we’re expecting a strong top-line result. SIA’s guidance for capacity to return to 81% of the pre-COVID-19 level by end-2022 is one quarter ahead of our assumption. Also, both May and June capacity and load factor are above our expectation, which we believe reflects the strong appetite for travel as more borders open and COVID-19 quarantines and testing requirements are relaxed. Group airlines’ passenger load factor for June reached 85.5%, same as the travel peak month of December 2019. As of end-June, SIA group capacity has recovered to 63.3% of pre-COVID-19 capacity. If we adjust our inputs to reflect the solid first-quarter capacity and load factor statistics, the upside potential to our current fair value estimate of SGD 5.60 would be around 4.4%. Pending the release of both yield and cost numbers, however, we keep our fair value estimate and earnings forecast unchanged. Higher costs could weigh on SIA for the balance of fiscal 2023.