He adds that the airline’s passenger yields, which narrowed further by 2.9% to 10 cents per revenue passenger-kilometre, are under pressure amid heightened competition given that airlines are continuing to add capacity across the industry.
The airline’s cargo business also faces an “uncertain outlook” on the back of Trump’s trade policies, which could hold back “critical business decisions that drive economic activity, and with it the demand for air cargo going forward”.
With this in mind, Ong has lowered his core earnings per share (EPS) estimates for FY2026 to FY2028 by 25% - 29% to factor in rising non-fuel costs and weaker cargo business.
The analyst has also lowered his target price to $6.75 from $6.85 previously, still based on an FY2026 P/B of 1.25 times.
Despite the negatives, Ong sees “pockets of opportunity” after the closure of Jetstar Asia on July 31. The group will increase its capacity to various Asian destinations including Malaysia, the Philippines, Sri Lanka and Thailand to fill the gaps.
This also includes Scoot commencing operations to Labuan Bajo and Medan in Indonesia, as well as Okinawa in Japan, subject to regulatory and operational approvals, Ong notes.
The demand for air travel is also likely to remain “healthy” in 2QFY2026 across most of SIA’s route regions due to the traditional peak in summer.
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Citi keeps ‘sell’ call, expects negative share price reaction
Citi analysts Kaseedit Choonnawat, Eric Lau and Samuel Seow have maintained their “sell” call and target price of $6.15 after SIA’s June profits stood at 23% of their estimates.
The analysts are expecting to see a negative reaction in SIA’s shares after the lower-than-expected results.
However, their discussions with investors show that there was optimism that -10%/-18% q-o-q/y-o-y in spot jet fuel price could drive earnings growth. At the same time, this follows “softness in pricing following four quarters of relative stabilisation, pressure from associates, and core overall capacity (ASK) ex-fuel pressure have overshadowed”.
Shares in SIA closed 3 cents higher or 0.4% up at $7.60 on July 28. The airline will be paying its final dividend of 30 cents for FY2025 on Aug 8.
Read more about SIA's 1QFY2026 results:
