SHARES of aviation and hospitality counters Singapore Airlines (SIA), SATS, SIA Engineering, ST Engineering and Genting Singapore jumped on Monday (Oct 11) after it was announced on Saturday (Oct 9) that Singapore will launch eight Vaccinated Travel Lanes (VTLs) with countries in Europe and North America.

Flag carrier SIA finished at S$5.52, climbing S$0.39 or 7.6 per cent, with some 35.9 million shares traded. The stock had jumped as much as 9 per cent within the first hour of the opening bell.

SIA Engineering peaked at S$2.20 at around 9.07am, before easing slightly to close at S$2.17, up 3.3 per cent on the day.

SATS closed 3.8 per cent higher at S$4.33 with 8 million shares changing hands, while ST Engineering advanced 0.5 per cent to S$3.91 by the end of the day.

Hospitality group Genting Singapore was among the top five most traded counters by value, rising S$0.035 or 4.8 per cent to finish at S$0.76. Genting Singapore is part of Malaysia's Genting Group, which owns Resorts World Las Vegas in the US as well as a number of casinos in the UK.

Separately, in a national broadcast on Sunday (Oct 10), Malaysia's Prime Minister Ismail Sabri Yaakob announced the country will resume interstate travel and reopen international borders from Monday (Oct 11) for the 90 per cent of its adult population that have been fully vaccinated against Covid-19.

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Industry observer Shukor Yusof, founder of Endau Analytics, said that the VTL was partly designed with SIA in mind, and taking into account some of the progress the participating countries have achieved in combating Covid-19.

"As can be seen from the impact it has had on SIA's website, there is quite an appetite from affluent Singaporeans and other residents on the island to make these long-haul trips. However, it is some way before these journeys could significantly alter SIA's battered bottomline but all said, it's encouraging for the airline," added Shukor.

In a DBS Group research report released on Monday (Oct 11), the brokerage highlighted that the total of 11 countries announced under the VTL scheme contribute 16.5 per cent of Singapore's normalised tourist count, and that these countries accounted for more than 6.7 million passengers at Changi Airport in 2019 (about 10 per cent of total passenger traffic). This implies that "growth is exponential from current levels" for the travel industry, the report noted.  

"We initially anticipated that airlines would have to offer flights at a discount to stimulate demand, given there could be some apprehension amongst the public, and hefty testing costs. However, the immense volume of users on SIA and travel meta-search websites following the announcement, and distinct uptrend in air fares we witnessed clearly demonstrates that fundamental demand is robust and travellers are willing and ready to splurge for their next trip," said the analysts. 

DBS analysts continue to maintain their "neutral" stance towards SIA, noting that although the imminent reopening will bring much needed respite to the airline and enable it to potentially turn operating cashflow neutral in end FY22022 to early FY2023, it may be difficult to control operating costs given the strength in crude oil and jet fuel prices.

The brokerage also believes the current reopening plan has largely been reflected in its share price, with the airline trading at more than 2 standard deviations above its 10-year average price-to-book value ratio, based on adjusted book value.

The analysts added: "We could turn bullish if buoyant air fares are sustained, or if VTLs with other important markets are established ahead of our expectations."

Commenting on SATS, the brokerage said the financial performance of the catering service provider will also improve from higher inbound and outbound passenger and flight traffic at Changi. However, unlike its cargo operations, which saw higher yields through the pandemic amid positive supply-demand dynamics, SATS is unlikely to enjoy higher yields on its ground handling operations. Hence, the analysts' view is that the impact will be less pronounced compared to SIA. 

With regard to valuations, the DBS analysts prefer Genting Singapore over SIA and SATS, noting that the hospitality company should benefit from the meetings, incentives, conferencing, exhibitions (MICE) events which "could come off more strongly" in the early part of 2022, owing to the latest VTLs.