Report Summary

• Singapore aviation sector remains strong, underpinned by continued growth in global passenger (+5.2% y/y in 2025) and air cargo volumes (+3.1% y/y), with positive outlook into 2026.
• Passenger traffic is expected to outpace GDP growth in 2026, especially in Asia Pacific; however, airlines face ongoing yield pressure due to intense competition and capacity growth.
• Aircraft delivery delays and ageing fleets sustain high demand for maintenance, repair & overhaul (MRO) services, benefiting upstream aviation and defence players.
• Global defence spending is on a structurally higher trajectory, supporting order visibility and revenue for defence contractors.
• DBS prefers upstream aviation and service providers (ST Engineering, SATS, China Aviation Oil) for superior earnings visibility and risk–reward; SIA Engineering downgraded to HOLD, Singapore Airlines remains neutral.