On a quarterly basis, 4QFY2025 passenger capacity and passenger load rose 2.9% y-o-y and 2.8% y-o-y respectively, with passenger load largely flat y-o-y at 86.4% in the period.
In regards to cargo, cargo load in March rose 2.0% y-o-y to 85.4% of pre-pandemic levels. Cargo capacity expanded 7.6% y-o-y, but cargo load grew at a slower rate of 2.0% y-o-y, to which Chen notes that volume strength in the East Asia route was offset by weaknesses of cargo demand in the Americas and Europe.
With this, cargo load factor dropped 3.1 ppts y-o-y in March. On a quarterly basis, 4QFY2025 cargo load was largely flat y-o-y, while capacity expanded 7.2% y-o-y.
On SIA group’s passenger network, the flag carrier now covers 128 destinations, compared with 137 destinations pre-pandemic. In March, the group suspended services of its budget carrier, Scoot, to Berlin.
Chen expects the group to report a net profit of around $400 million for the 4QFY2025 on May 15 after the market closed, which is a 30% y-o-y from 4QFY2024’s $575 million and a 24% q-o-q fall from 3QFY2025’s $528 million.
He writes in his Apr 17 report: “Our estimate is based on the following assumptions; the reported 4QFY2025 operating statistics, low-single-digit percentage y-o-y moderation in both passenger and cargo yields, a 5% y-o-y drop in average fuel cost per unit of capacity and y-o-y largely flat-ish or marginally higher non-fuel operating cost per unit of capacity.”
Meanwhile, Chen also sees that SIA should see a lift in FY2026 earnings thanks to savings in fuel costs.
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He notes that jet fuel prices have dropped about 8% over the past two weeks due to fears of a global recession triggered by the US tariff war.
“Assuming jet fuel prices stay at the current level of about US$84 ($110) per barrel throughout FY2026, SIA’s FY2026 average fuel cost per unit of capacity after hedging would be about 9% lower than FY2025 average levels, leading to about $500 million savings in fuel costs in FY2026,” writes Chen.
The analyst highlights that this should support SIA’s FY2026 earnings, partially offsetting continued pressure on passenger and cargo yields.
Overall, Chen does not expect a major slowdown in air travel demand, after factoring in the Ministry of Trade and Industry (MTI) cut in 2025 GDP from 1% to 3% to between 0% to 2%.
“In our financial model, we have pencilled in a 1.5% y-o-y growth in passenger load for FY2026, slower than FY2025’s 6.4% y-o-y growth, driven by SIA’s continued network recovery and capacity growth,” writes Chen.
Cargo outlook on the other hand, is more uncertain.
Although the US tariffs present significant uncertainties to global air cargo outlook in the medium term, the analyst sees that the 90-day pause for negotiation provides a window for manufacturers in Asia to expedite shipments to the US, mitigating uncertainties beyond the 90-day period.
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He continues: “As such, SIA’s 1QFY2026 cargo performance may benefit from some shipment frontloading, though there is no concrete data point available to quantify the impact at this stage.”
Based on Chen’s preliminary estimate, SIA’s 1QFY2026 results could achieve a mid-single-digit growth at the operating profit levels, although this estimate will be subject to operating statistics disclosure and the development of jet fuel prices in the next two months.
As such, the UOBKH analyst has raised his FY2026 and FY2027 earnings forecasts by 17% and 6% to $1.37 billion and $1.18 billion respectively.
Excluding the gain from the disposal of SIA group’s stake in Vistara, Chen’s FY2025 earnings forecast remains at $1.67 billion.
Chen is also hoping for a fine FY2025 dividend yield.
He writes: “In view of SIA’s strong balance sheet and delayed capital expenditure (capex) due to aircraft original equipment manufacturers’ (OEM) delivery issues, we reckon that SIA has the flexibility to raise its dividend payout ratio to 60% to 70% of core earnings in FY2025, from 53% in FY2024."
“A 60% payout ratio will lead to a 23 cent final dividend for FY2025, resulting in a dividend yield of 5.2% for full-year FY2025 based on the current price,” adds Chen.
Key risks noted by him include weaker-than-expected macroeconomic environment dampening air travel demand, potential higher US tariffs after the 90-day negotiation period impacting global air cargo volume and finally, geopolitical tensions causing shocks to fuel prices.
As at 3.53 pm, shares in Singapore Airlines are trading 4 cents higher 0.63% up at $6.39.
