SIA share price falls despite record revenue. What’s driving the weakness?



By Gerald Wong, CFA • 21 Feb 2024 • 0 min read

SIA's share price fell sharply after it reported its latest earnings. We find out what is driving the weakness in SIA's share price.

sia share price feb 2024
In this article

What happened?

Singapore Airlines (SIA) saw a sharp fall in its share price today. 

As of 10am, SIA’s share price has declined by more than 8% to reach $6.76.

The share price decline came after SIA reported its earnings for third quarter fiscal year 2023/24 ended 31 December 2023.

sia share price 21 feb 2024

SIA announced net profit of S$659 million in the quarter, an increase of 4.9% compared to the previous year. 

This would bring its net profit for the first nine month of fiscal year 2023/24 to S$2.10 billion, falling short of investor expectations. 

Let us find out what is driving weakness in SIA’s earnings and share price. 

sia 3q fy24 earnings
Source: Company data

What you need to know about SIA results

#1 – Revenue reaches record high

SIA reported revenue of S$5,082 million for the quarter, an increase of 4.9% compared to the previous year.

This would also mark a quarterly record for SIA, exceeding the previous high of S$4,846 million.

The higher revenue was driven by robust demand for air travel, led by a rebound in North Asia as China, Hong Kong, Japan and Taiwan fully reopened. 

As a result, SIA and Scoot carried 9.5 million passengers in the quarter, an increase of 29.4% compared to the previous year. 

sia singapore airlines revenue feb 2024
Source: SIA

#2 – Passenger load factors decline from peak but remain high

SIA’s reported passenger load factor (PLF) of 88.2% in the quarter, as the increase in passenger traffic outpaced its expansion in capacity. 

The passenger load factor was slightly higher compared to 87.4% in the previous year.

However, it has declined from 88.6% in the previous quarter, and the record high of 88.9% in the first quarter of fiscal year 2023/24. 

sia singapore airlines plf feb 2024
Source: SIA

#3– Cargo business benefited from stronger seasonal year-end demand

SIA’s cargo business saw a slight boost with strong year-end demand from the e-commerce segment.

As a result, its cargo load factor reached 55.5% in the quarter, an increase of 3.9% compared to the previous quarter.

However, the cargo business has shown signs of slowing when compared to the previous year.

Cargo flown revenue declined by 35.1% to S$559 million, while cargo yields were 37.4% lower compared to the previous year. 

sia singapore airlines cargo feb 2024
Source: Company data

#4 – Costs surged with higher fuel and non-fuel costs

The key surprise for investors may be the sharp increase in expenditure reported by SIA.

Expenditure soared by 9.3% to S$4,473 million in the quarter, driven by an increase in both fuel and non-fuel costs. 

The higher net fuel cost was driven by the larger number of flights as SIA raised its capacity.

At the same time, SIA also had to incur higher staff costs, handling charges, passenger costs, aircraft maintenance and overhaul costs, landing and parking charges with the capacity increases. 

sia singapore airlines cost feb 2024
Source: SIA

#5 – Operating profit declines sharply

SIA’s operating profit fell to $609 million in the third quarter of fiscal year 2023/24, a 19.3% decline compared to the previous year. 

This marks the weakest quarter profit since the second quarter of fiscal year 2022/2023, when passenger traffic started to recover strongly with the post-pandemic travel boom. 

Overall, the higher passenger traffic was insufficient to offset the lower cargo revenue and higher net fuel costs. 

sia singapore airlines profit feb 2024
Source: Company Data


Looking ahead, SIA expects demand for air travel to remain healthy in the last quarter of fiscal year 2023/24 and the first quarter of FY2024/25. 

Its forward sales number continue to be robust, supported by demand for leisure travel through the school holidays and Easter peak in March and April 2024.

However, SIA warned that passenger yields continue to come under pressure from increased competition as capacity restoration continues across the industry.

High fuel prices and inflationary pressures have also led to a more challenging operating cost environment.

At the same time, cargo volumes are expected to be lower in the seasonally weaker January to March quarter, which may continue to put pressure on cargo yields. 

What would Beansprout do?

SIA’s latest results show that operating profit has declined sharply from the post-pandemic high.

While passenger volume continues to rise, weaker passenger load factors, cargo demand as well as rising costs have eroded its profitability. 

The trend of weaker passenger load factor appears to have continued into the latest quarter, with the passenger load factor declining further to 84.2% in January 2024 from 88.7% in December 2023 and 85.9% in January 2023. 

This might be why most analysts have a more neutral view on SIA, with a consensus share price target of S$6.96 as of 21 February 2024.

sia singapore airlines share price target feb 2024

On a more positive note, analysts are expecting SIA to maintain its dividend per share of S$0.38 this fiscal year. This will translate to a dividend yield of 5.6% based on its current share price. 

SIA is currently trading at Price-to-book valuation of 1.3x, above its historical average. 

With the weaker outlook ahead, we would take a more cautious view on SIA despite the share price correction. 

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