Highlights

• Jun 26 operating data came in in line with our projections, with pax load and cargo load rising 4.1% and 5.1% yoy, respectively.
   
• We now forecast SIA’s 1QFY27 bottom line to be around breakeven, reflecting higher fuel costs amid the US-Iran war and a major drag from Air India.  
   
• Renewed US-Iran crossfire has led to a rebound in fuel prices. Nevertheless, we remain hopeful for a rebound in SIA’s profitability in 2QFY27, driven by effective cost pass-throughs and SIA’s comfortable fuel hedging position.  
   
• Maintain HOLD on SIA with a slightly higher target price of S$6.76.
   

Analysis

• Jun 26 operating data in line. Singapore Airlines’ (SIA) group pax load rose 4.1% yoy in Jun 26, driven by robust demand for air travel, but lagged pax capacity growth of 6.0% yoy. As a result, pax load factor dipped 1.6ppt yoy to 87.1%, a still-healthy level by historical standards. Cargo load rose 5.1% yoy, bolstered by AI- and data centre-related movements, as well as frontloading of e-commerce volume into Europe ahead of the implementation of the EU’s small parcel duty. Against a 2.3% yoy decline in cargo capacity, cargo load factor expanded 4.2ppt to 60.6% in Jun 26.