"Given SIA’s strong balance sheet and profitability, this unfortunate incident is not expected to be a material financial risk to the group," suggests Ong in his June 13 note.
He points out that despite SIA holding a stake of 25.1% since last November, Air India operates as a standalone entity, and any liabilities arising from the crash - be it aircraft damage, compensation, or lawsuits - are likely to be mostly covered via aviation insurance.
"Pending investigation outcome, we also think SIA is unlikely to halt its Boeing 787 flights due to its strong safety track record," says Ong.
He believes that the accident should not derail Air India's plan to turn around and become a "self-sustaining" company in FY2025 on the back of record revenue, coupled with lower fuel costs.
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"Despite stiff competition, this shows that Air India’s transformation programme is working well as it continues to optimise its operations for efficiency gains along with continued fleet upgrading," says Ong.
Separately, Jetstar Asia, a Qantas subsidiary, is shutting down. It now runs 180 weekly services out of Changi and carried 2.3 million passengers, or 3% of the airport's total.
The way Ong sees it, the exit of Jetstar Asia may bring some reprieve in the competitive low-cost carrier market in terms of load factor and yield.
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To fill the gap, Scoot, the low-cost airline of SIA Group, plans to ramp up its weekly flights in the region and launch new routes to Okinawa in Japan and Labuan Bajo in Indonesia – both destinations that Jetstar Asia serves exclusively from Changi Airport.
According to Ong, with the spike in crude oil prices amid escalating Middle East tension, he expects SIA's shares to pull back, especially given the recent outperformance.
For now, he has kept his "hold" call and $6.85 target price, which is based on mid-cycle P/B of 1.25x as the stock should be somewhat cushioned by cum dividend of 30 cents that goes ex on Aug 8.
SIA shares were down 1.15% to $6.86 as at 1.52 pm.
