Founder & Managing Director, AIR Control Tower, AIR Control Tower

Neil Glynn

Founder & Managing Director, AIR Control Tower

AIR Control Tower

AIR Control Tower is an independent research and analysis platform. Its mission is to provide impactful insight and analysis across the global airline industry at a company and market level via detailed financial models to aid decision making for key stake holders at a time when risks have seldom, if ever, been higher and the global sector grapples with the imperative of funding de-carbonisation. Unique analysis forecasting global carrier-level earnings/cash flows, and restructuring/de-leveraging prospects, is designed to dynamically assess the health of the industry, predict surprises and identify potential requirements for third party support.

Insights on the global airline industry

Equity Bottom-Up

<ul>
<li>We expect Singapore Airlines to report a disappointing 4Q24 on 15 May, as earnings normalisation continues.</li>
<li>Inflationary pressure is a key theme at SIA, with it suffering one of the highest levels of inflation in the APAC region.</li>
<li>Our forecasts for FY25, which suggest further earnings normalisation, are c.20% below consensus at the operating level.</li>
</ul>


We expect Singapore Airlines to report a disappointing 4Q24 on 15 May, as earnings normalisation continues.
Inflationary pressure is a key theme at SIA, with it suffering one of the highest levels of inflation in the APAC region.
Our forecasts for FY25, which suggest further earnings normalisation, are c.20% below consensus at the operating level.


Singapore Airlines – 4Q Likely to Extend the Theme of Earnings Normalization as FY25 Comes into View

<ul>
<li>We cut our SIA operating profit by 9% to S$2.6bn in FY24 and by 17% to S$1.5bn in FY25 versus consensus of S$2.1bn.</li>
<li>SIA's cost control is under-examined and we publish a deep dive on a concerning level of inflation relative to key peers, which actually escalated in 3Q24.</li>
<li>Cargo broke even in peak season, and Scoot's margins present a conundrum as it may need to be further utilization to help SIA with cost management.</li>
</ul>


We cut our SIA operating profit by 9% to S$2.6bn in FY24 and by 17% to S$1.5bn in FY25 versus consensus of S$2.1bn.
SIA's cost control is under-examined and we publish a deep dive on a concerning level of inflation relative to key peers, which actually escalated in 3Q24.
Cargo broke even in peak season, and Scoot's margins present a conundrum as it may need to be further utilization to help SIA with cost management.


Singapore Airlines – Onset of Earnings Normalization to Heighten Focus on Efficiency

Global Mobility/Transport, Equity Long-Short

Mohshin Aziz

<ul>
<li>
<a href="https://www.smartkarma.com/entities/singapore-airlines-ltd" target="_blank" data-smartkarma-citation="entities:74:1" rel="noopener">Singapore Airlines (SIA SP)</a> (SIA) November operating statistics were good, passenger load factor rose by 1.9ppt YoY to 87.8%, and cargo load factor rose by a similar quantum  </li>
<li>Market observations suggest yields should remain at high levels and cost items such as fuel and USD-denominated items on a favorable downtrend </li>
<li>If this performance continues, SIA will beat consensus easily. We recommend BUY with a TP of SGD8.07 - pegged to 10x FY24 PE. (+26% UPSIDE)  </li>
</ul>



Singapore Airlines (SIA SP) (SIA) November operating statistics were good, passenger load factor rose by 1.9ppt YoY to 87.8%, and cargo load factor rose by a similar quantum  
Market observations suggest yields should remain at high levels and cost items such as fuel and USD-denominated items on a favorable downtrend 
If this performance continues, SIA will beat consensus easily. We recommend BUY with a TP of SGD8.07 - pegged to 10x FY24 PE. (+26% UPSIDE)  


Singapore Airlines (SIA SP | BUY | SGD: 8.07): Nov' 2023 Op Stats, More Reason to Be Bullish

<ul>
<li>Following 2Q24 , our operating profit of S$2.9bn and a net profit of S$2.6bn, stand considerably higher than consensus of S$2.5bn and S$2.3bn respectively. </li>
<li>SIA’s continue to suffer more inflation than most peers (ex-Qantas). However, 1H24 illustrated that continued restoration of capacity is diluting pressure and narrowing the gap to peers.</li>
<li>The true test for SIA will be management of normalizing profitability beyond FY24. We model operating profit of S$1.8bn/net profit of S$1.5bn in FY25, versus consensus of S$1.5bn/S$1.2bn.</li>
</ul>


Following 2Q24 , our operating profit of S$2.9bn and a net profit of S$2.6bn, stand considerably higher than consensus of S$2.5bn and S$2.3bn respectively. 
SIA’s continue to suffer more inflation than most peers (ex-Qantas). However, 1H24 illustrated that continued restoration of capacity is diluting pressure and narrowing the gap to peers.
The true test for SIA will be management of normalizing profitability beyond FY24. We model operating profit of S$1.8bn/net profit of S$1.5bn in FY25, versus consensus of S$1.5bn/S$1.2bn.


Singapore Airlines: Further Positive Surprises to Come in 2H24 - Bigger Test in FY25

<ul>
<li>Dearth of international flights from Chinese and Russian carriers -- 2nd &amp; 3rd biggest global aviation market, will distort supply, underpins strong yields and profitability.  </li>
<li>SIA's cost management is superior thanks to high asset utilisation, stable SGD vs. the USD, and access to attractive financing.  SIA's competitors severely lack these attributes. </li>
<li>We forecast FY24 net profit of SGD2.4b (+13.1% YoY) and peg it to 10x PE to derive a TP of SGD8.07, +30% UPSIDE potential.  </li>
</ul>


Dearth of international flights from Chinese and Russian carriers -- 2nd &amp; 3rd biggest global aviation market, will distort supply, underpins strong yields and profitability.  
SIA's cost management is superior thanks to high asset utilisation, stable SGD vs. the USD, and access to attractive financing.  SIA's competitors severely lack these attributes. 
We forecast FY24 net profit of SGD2.4b (+13.1% YoY) and peg it to 10x PE to derive a TP of SGD8.07, +30% UPSIDE potential.  


Singapore Airlines: Supply Dislocations Will Underpin Strong Profits for Much Longer

Singapore

Singapore Airlines Limited provides air transportation, engineering, pilot training, air charter, and tour wholesaling services. The Company's airline operation covers Asia, Europe, the Americas, South West Pacific, and Africa.

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Singapore Airlines (SIA SP)

Singapore Airlines – 4Q Likely to Extend the Theme of Earnings Normalization as FY25 Comes into View

We highlight out expectation that 4Q24 will further emphasize SIA earnings are normalising down from peak levels and we highlight our FY25...

Neil Glynn

Singapore Airlines – Onset of Earnings Normalization to Heighten Focus on Efficiency

Deep dive on SIA cost control, which is lagging key APAC peers, and journey to "normalised" earnings as capacity restoration continues.

Neil Glynn