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Hot stock: SIA slips after CEO cautions over demand for premium seats

Friday, March 4, 2016 - 10:13

37632708 - 03_03_2016 - SINGAPORE AIRLINES RECEIVES AIRBUS A350.jpg

AMID broad market gains, shares of Singapore Airlines (SIA) slipped on Friday after its chief said demand for its premium seats is holding up but could take a hit in the future given headwinds in the global economy.

Shares of SIA lost nine Singapore cents, or 0.78 per cent, to S$11.46 as at 10am.

"With the kind of outlook we're seeing in the world economy, we do expect that will affect business demand at some point. That's something we'll watch for," said SIA chief executive Goh Choon Phong, speaking to media on Thursday on the sidelines of the arrival ceremony for its first Airbus A350-900.

"At this point in time, we are not really seeing weaker demand for Business Class," he said.

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This is the first of the 67 A350 aircraft on firm order by Singapore's national carrier. OCBC Investment Research cautioned in a report on Friday that even though the new A350s will allow SIA to serve more long-haul destinations with improved fuel efficiency, the yields on SIA's key routes to Europe are still under pressure due to intensifying competition from the Gulf carriers.

"While we remain cautiously optimistic on the potential significant savings from cheap jet fuel, we think SIA's hedging policy may continue to reduce such savings on significant hedging losses," said the brokerage. "We prefer to get clarity over its FY17 hedging positions before reviewing our assumptions again."

The brokerage kept its "hold" rating, but kept its target price at S$11.70.

Separately, SIA's general offer for the shares in Tiger Airways that it did not already own closes on Friday, and the carrier will take full control of the budget airline, SIA said in a media release.

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