SIA flying into turbulence from fuel costs, Air India losses

[SINGAPORE] Analysts are cautious about Singapore Airlines ( SIA ) after the flag carrier’s earnings for the six months ended Mar 31 more than halved year on year.

While the carrier attributed the fall to the absence of a gain from the disposal of Vistara a year earlier, some analysts are concerned that its core earnings are flattening.

SIA’s operating profit of S$1.6 billion for H2 FY2026 almost doubled from the first half, but CGSI analyst Raymond Yap noted that year on year, it was almost flat due to a wider share of losses from Air India.

The group reported a full-year associate loss of S$829 million, which Citi said was “in line with” the 25 per cent prorated Air India loss of about S$890 million.

Another major concern lies in the high fuel costs and flight disruptions faced by airlines around the world after the Middle East war broke out in late February.

Given a “month of lag” in jet fuel supply contracts, analysts believe that results for the period ended Mar 31 likely did not include higher fuel costs sparked by the conflict.

DBS Group Research analyst Jason Sum warned that FY2027 will “prove far more challenging” for SIA even though jet fuel prices have “stabilised” at about US$150 to US$160 per barrel.

The current prices, while not more than double pre-Iran war, are still about 70 per cent higher.

Sum said that fuel costs would eat into margins, with SIA’s management acknowledging that while both its full-service carrier and Scoot have raised ticket prices, “the adjustments do not fully offset the rise in the price of jet fuel”.

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As for Air India, Sum said its “losses are expected to remain elevated near term.”

SIA chief Goh Choon Phong said as much in an earnings brief on Friday (May 15). Turning the South Asian carrier around is “definitely not going to be a walk in the park”, he noted.

DBS Group Research and CGS International (CGSI) on Friday kept their “hold” recommendations, with target prices of S$6.50 and S$6.44, respectively.

Citi analysts in a Thursday note maintained a “sell” on the counter with a target price of S$6.28, expecting further downside to the 2026 and 2027 forecast earnings consensus.

On the plus side

On a positive note, SIA could remain a dividend play.

CGSI noted that SIA dividends were a bright spot. Despite the associate losses, the group declared higher-than-expected dividends, comprising a final regular dividend of S$0.22 and a special final dividend of S$0.07.

Combined with interim payouts, the total dividend for FY2026 was S$0.37, representing a 99 per cent payout ratio.

CGSI forecasts a 33 per cent year-on-year drop in core earnings per share for FY2027, but said that attractive dividend yields support its “hold” call.

Investors agree. Following the results and dividend news, shares of SIA rose to an intraday high of S$6.45 on Friday.

Aviation juggernaut

SIA’s operational engines are still firing. The group posted a record revenue of S$10.8 billion for the second half, up 8 per cent year on year.

On its H2 operating profit of S$1.6 billion almost doubling from H1 and rising 72 per cent year on year, CGSI pointed to a strong rise in passenger yields on the back of robust demand and high load factors.

Citi said it viewed the airline as being among those in the Asia-Pacific with the “highest probability to recoup additional fuel costs”, thanks to it cornering 50 per cent of the market between Australia and Europe.

DBS expects yield performance to “remain robust, with yields at full-service carrier SIA to rise by double digits” for 2027, Sum said, with mid-single-digit yield growth expected at Scoot.

The increase is set to be supported by “premium cabin demand, constrained industry-wide aircraft supply and delayed fleet deliveries globally”.

SIA shares fell 0.2 per cent or S$0.01 to close at S$6.27 on Thursday, before the results were announced.