DBS Bank Ltd, 14 January 2026
Excerpt from DBS Bank Ltd report.
Report Summary
- Singapore’s aviation sector remains fundamentally strong into 2026, driven by sustained growth in passenger and air cargo volumes, with APAC leading global expansion.
- Supply constraints, such as aircraft delivery delays and engine durability issues, keep global fleets older and more intensively used, supporting robust demand for maintenance, repair, and overhaul (MRO) services.
- Upstream aviation and defence service providers like ST Engineering (STE), SATS, and China Aviation Oil (CAO) are favoured over airlines for superior earnings visibility and risk–reward; SIA Engineering (SIAEC) is downgraded to HOLD due to execution risks.
- Global defence spending is shifting higher amid rising geopolitical tensions, with Singapore and Europe increasing outlays, benefiting defence-related aviation companies.
- Air cargo growth is expected to outpace global trade in 2026, supported by resilient demand for high-value shipments (e.g., AI hardware, e-commerce) and manufacturing diversification.
- Singapore Airlines faces ongoing yield pressure and competitive intensity, limiting margin upside despite healthy passenger demand.
- Valuations for upstream aviation stocks remain attractive, with STE and SATS expected to outgrow peers through 2027.
Above is an excerpt from a report by DBS Bank Ltd. Clients of DBS Bank Ltd can be the first to access the full report from the DBS website: https://www.dbs.com.sg/
