On Monday, Citi reaffirmed its Buy rating on Singapore Airlines (OTC:) Ltd. (SIA:SP) (OTC: SINGF (OTC:)), maintaining a price target of SGD7.72. The firm anticipates that the airline’s management will project continued strength in passenger yields through the summer and potentially to the end of 2024, which is expected to boost the company’s share price. The airline’s next analyst briefing is scheduled for February 21, 2024, following guidance for a return to normalcy after their September quarter results in a November 2023 meeting.
Citi predicts that Singapore Airlines’ passenger yield and earnings could exceed expectations in the summer of 2024. Despite the industry’s capacity on the airline’s key long-haul routes nearing 90-105% of pre-Covid levels by that summer, Citi expects Singapore Airlines’ passenger yield to remain high throughout the fiscal years 2024-2025. The forecast is supported by a substantial increase in forward ticket prices, as observed from the firm’s ticket booking exercises.
The data reveals that ticket prices for March through September 2024 have risen by 47% for business class and 53% for economy class since the previous review in November 2023. This increase accounts for approximately 52% of the airline’s Available Seat Kilometers (ASK). The rise in ticket prices is attributed to strong demand on Singapore Airlines’ key routes, as well as the airline’s ability to charge a premium compared to non-stop alternatives, which has been evident until July 2024.
According to Citi’s analysis, the robust demand could be a result of Singapore Airlines’ strategic early promotions aimed at establishing a base load to elevate ticket prices closer to the flight date. Alternatively, it could reflect a strong customer preference for the airline’s overall experience, which was recognized as the world’s number one airline in 2023 by Skytrax. The firm’s outlook suggests that these factors will play a significant role in the airline’s performance and share price trajectory in the near future.
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