Highlights

• Aug 26 operating data came in in line with our projection, with pax load and cargo load rising 1.5% and 2.8% yoy, respectively.
   
• The sharp rebound in jet fuel prices amid re-escalated Middle East tensions has led us to cut our FY27/28 earnings forecasts for SIA by 21%/5%, respectively. Our 2QFY27 net profit guidance has been reduced to S$230m-370m.
   
• Air India is reportedly seeking fresh capital injection from its owners including SIA. Weighing the opportunities in India and the uncertainties related to Air India’s turnaround timeline, we are largely neutral towards this deal.  
   
• Downgrade SIA to SELL due to lack of near-term catalysts, with a lower target price of S$6.16 (pegged to 1.19x FY27F P/B).
   

Analysis

• Aug 26 operating data broadly in line. Singapore Airlines’ (SIA) passenger load increased 1.5% yoy in Aug 26, supported by healthy air-travel demand, but lagged passenger capacity growth of 3.5% yoy. Consequently, passenger load factor declined 1.6ppt yoy to 86.4%, which remains healthy by historical standards. Cargo load rose 2.8% yoy, despite a 0.7% yoy drop in cargo capacity due to aircraft maintenance activity. As a result, cargo load factor improved 2.0ppt yoy to 57.2%. SIA noted that cargo demand remains strong across most markets, although e-commerce flows to Europe have softened following the EU’s introduction of a small-parcel duty and removal of the de minimis exemption from 1 Jul 26.