Flag carrier Singapore Airlines (SIA), posted a stellar 3QFY2025 earnings performance with a 2.7% year-on-year (y-o-y) growth to a record $5.2 billion.
This was “on the back of robust travel demand and SIA’s sustained lead in capacity post-reopening (of air travel),” says OCBC equity research team analyst, Ada Lim, in her Feb 24 report.
The record earnings can be attributed to a 1.7% y-o-y growth in passenger flown revenue credited to a record of 10.2 million passengers flown and a cargo flown revenue growth of 9.7% y-o-y given a 14.6% increase y-o-y in cargo load.
SIA also saw improved operating results across all their three main businesses in this quarter. Net profit was boosted by a 3.3% y-o-y growth in operating profit along with a one-off $1.1 billion non-cash accounting gain following the Air India-Vistara merger in November 2024 which came in at $1.6 billion.
On top of this, SIA also saw a slowing growth in their total expenditure of 2.6% y-o-y to $4.6 billion given lower fuel prices.
Despite such a favourable quarter for SIA, Lim still has her reservations about the outlook for the airline.
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“We think that SIA is nearing the end of the runway for exceptionalism, given that passenger yields are likely to have peaked and are on a moderating trajectory as other airlines progressively return capacity to the market, especially in the region,” she states in the report.
The report also provides limitations on the usefulness of this stellar quarterly performance as a good reflection of the growth potential of SIA.
Lim notes that without the exceptional gain from the Air India-Vistara merger, net profit would have been 19.8% lower y-o-y at $598.1 million. This would be due to lower interest income on lower cash balance with the redemption of mandatory bonds along with the share of losses including losses from Air India and higher tax expenses.
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SIA’s management is still confident that robust demand for passenger and cargo will remain robust in the final quarter of the financial year although yields are very likely to continue declining on the continued injection of capacity across passenger and cargo.
DBS Group Research also expects US-China trade tariffs to weigh on air cargo demand, exacerbated by easing shipping disruptions which could act as a headwind for SIA's cargo demand moving forward.
“Nonetheless, we remain confident that SIA’s brand proposition, service quality and product innovation will allow it to navigate the transition from recovery to growth going forward,” Lim writes.
OCBC continues to value SIA in the long-term instead of the near-term.
On the back of strong quarterly results, the bank raises their target price to $6.50 from $6.30 pegged to a maintained forward price-to-book ratio of 1.09 times.
“We maintain our ‘hold’ rating but see upside risks to final dividends on the back of the strong quarterly results,” Lim’s report states.
DBS also raised their target price for SIA to $6.30 up from $6.00 from their previous report but also maintained their 'hold' rating.
As at 4:15pm, shares in SIA are trading at 16 cents and 46 cents higher than OCBC’s and DBS' target price at $6.66 respectively.
