SIA

SIA: SIA mainline’s load factor climbed 3% pts to 82% in December as passenger traffic rose 6% yoy on a 3% increase in capacity. Long-haul routes performed particularly well, with load factors to Europe, Americas and the South West Pacific all topping 80% last month. On the other hand, SilkAir suffered a surprising 6% pt fall in load factor last month as passenger growth of 11% was outstripped by capacity growth of 20%. SIA highlighted that promotions were a factor in the improvement and SIA indicates that it will maintain these stimulating measures even though they are likely to compress yields. Also, cargo capacity should decline further as SIA recently parked one of its 13 freighters. With the aggressive competitive by the Middle Eastern carriers and the low-cost carriers, CIMB believes that yields are likely to remain soft for SIA. Unlike the North Asian airlines, SIA’s sluggish cargo traffic looks like it will linger further. Although better economic conditions may help SIA, we believe that its earnings improvements are likely to lag behind regional network peers. CIMB currently have a NEUTRAL rating on the Group, with a TP of $11.00.