Report Summary

• Singapore Airlines’ 2QFY26 earnings fell 82% YoY to SGD52m, mainly due to losses from Air India and lower interest income, despite operating profit rising 22.5% due to healthy passenger demand and lower fuel prices.
• The research maintains a SELL rating and lowers the target price to SGD6.35, citing weaker yields, rising costs, and prolonged Air India losses.
• Passenger demand remains robust, with load factor and traffic growth exceeding capacity, but yields are under pressure amid competition.
• Cargo business continues to face challenges from falling yields and subdued market conditions due to trade policies and geopolitical tensions.
• SIA announced a capital return plan with a special dividend, but overall dividend payout is lower to support upcoming capex and potential Air India cash calls.
• Financial forecasts have been revised down, with FY26-28E EPS cut by 28-30% and concerns over margin pressure due to rising opex and fuel prices.
• SIA’s ESG score is 75, reflecting strong policies and targets, but with room for improvement in environmental metrics.