The group’s passenger network remained unchanged m-o-m in August, covering 129 destinations. Before the pandemic, SIA had a network of 137 destinations.
This set of operating data is in line with the expectations of UOB Kay Hian’s (UOBKH) Roy Chen, who is keeping his “sell” call, as he remains concerned about issues with SIA’s associate Air India.
However, he has raised his target price slightly from $6.03 to $6.05 to take into account lower projections for fuel costs.
In the month, although jet fuel prices rebounded from lows of near US$80 ($102.09) per barrel in May, it remained “hovering at benign” levels in the past few months, with the latest price around US$90 per barrel.
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Chen writes: “Based on our estimates, SIA’s average unhedged jet fuel cost per barrel in 2QFY2026 would be 5% to 6% higher q-o-q, but 8% to 9% lower y-o-y.”
Meanwhile, he expects Air India to remain a key drag. The loss-making entity was a key reason behind SIA’s 1QFY2026 results miss, causing a 59% y-o-y drop in SIA’s net profit.
“For 2QFY2026, we expect Air India to remain a major drag to SIA, as the July-September quarter is the seasonally weakest quarter for air travel in India due to the monsoon weather.
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“In addition, we cannot rule out the possibility that Air India may recognise some provisions for the Air India Flight 171 air accident that happened on Jun 12, 2025, which we cannot reliably estimate due to the lack of clarity,” writes Chen.
With this, Chen expects SIA to record a 10% y-o-y growth at the operating profit levels, driven by growth in both pax and cargo loads and y-o-y lower jet fuel prices, but partly offset by y-o-y moderation in pax and cargo yields.
However, he adds that this growth in operating profit would be “more than offset” by the drag from Air India and a y-o-y drop in interest income driven by the sharp decline in deposit interest rates.
“Taking all these factors into account and assuming no additional provision by Air India for the air accident, we project SIA’s 2QFY2026 net profit to land in the range of $100 million to $200 million, with the midpoint of $150 million representing a significant 48% y-o-y drop from 2QFY2025’s net profit of $290 million,” writes Chen.
He raises his earnings forecasts for SIA by 2.3% to 2.5% for the FY2026, FY2027 and FY2028 to $1.02 billion, $1.03 billion and $1.05 billion respectively, as he finetunes his projections for pax and cargo loads, as well as reflect updated jet fuel prices. Chen’s updated FY2026 net profit represents a 36% decline from the FY2025 core earnings levels.
His updated target price of $6.05 is based on a 1.17 times FY2026F price-to-book value ratio (P/B), pegged to 0.5 standard deviation (s.d.) above SIA’s long-term historical mean P/B of 1.08 times.
“We think the overall yoy declining earnings in the rest of the year may continue to de-rate SIA. Based on our updated earnings forecasts, SIA’s FY2026 dividend yield would decline to 3.5% in FY2026, even if we assume a 70% payout ratio, pegging to the upper end of SIA’s historical payout range,” writes Chen.
Key risks noted by the analysts include a weaker-than-expected macroeconomic environment dampening air travel and air cargo demand, stiff competition compressing yields, and a prolonged Air India drag. Should SIA post declining earnings performance y-o-y, this would be a key catalyst for de-rating, adds Chen.
As at the mid-day break, shares in Singapore Airlines are trading flat at $6.52.
