See: SIA group passenger load factor up 0.3ppt to 85% in Dec 2018
The parent airline saw PLF increase 1ppt to 85.5%, marking its ninth consecutive month of improvement as traffic outpaced capacity growth.
3Q19’s load factor was also up 1.8ppt, which holds scope for improved profitability.
During the quarter, SIA noted that revenue relative to seat capacity (RASK) remained resilient. In 2Q19, RASK improved by 3.1%, while yields fell 1%.
In a Thursday report, analyst K Ajith says, “For pax yields to remain at least flat y-o-y, RASK would have to rise by 2.2% in 3Q19.”
However, cargo traffic saw its third consecutive month of decline, which according to the analyst, is not surprising. This is due to slowing global trade and restocking ahead of the imposition of tariffs by the US.
Moreover, leading indicators such as weak PMI now seem to suggest that the trend of weaker cargo will accelerate into 2020.
Scoot also saw PLF declining for two consecutive months and Ajith reckons that the carrier is likely to report a loss. This is due to repeated flight delays and concerns over problems with the Rolls Royce engine on the Dreamliners, which are also expected to affect demand going forward.
Over the medium term, airline companies could be hit by higher jet fuel costs as IMO2020 kicks in. The International Maritime Organisation (IMO) mandates that by Jan 2020, shipping companies cut marine fuel’s sulphur content to less than 0.5%. Some experts believe that this will cause a shortage of supply for other energy distillates, including jet fuel.
As at 11.35am, shares in SIA are trading 8 cents lower at $9.68 or 0.8 times FY19 book with a dividend yield of 1.8%.
