SIA

SIA: Nov operating data shows further weakness.
Pax traffic fell 3% y/y in Nov vs 1% y/y growth in Oct and 2% growth y/y ytd. On
a m/m basis (adj. for the shorter month in Nov), traffic fell 1%, weaker than normal seasonality. SIA’s Nov daily pax traffic tended to be 2% higher m/m on avg in the past 22 years.

Passenger load factor (PLF) fell 4ppts y/y, 2ppts m/m to 75%. This was slightly higher than SIA’s avg Nov PLF of 74% in the past 22 years. PLFs fell in all route regions with the largest decline on American routes, down 6ppts y/y to 73%, followed by 4ppt declines on N & SE Asian and W Asia/African routes to 79% and 70%.

SilkAir’s pax traffic rose 8% y/y, 13% m/m. PLF fell 3ppts y/y but rose 5ppts m/m to 79%. PLF on N & SE Asian routes was 79% (-3ppts y/y, +3ppts m/m). PLF on W Asian routes fell 1ppt y/y but rose 11ppts m/m to 80%.

Cargo traffic rose 1% y/y in Nov, better than its 2% decline in the past few months, raising ytd growth to 2%. On m/m basis, traffic rose 1% but was weaker than normal seasonality. In the past 22 years, Nov daily cargo traffic tended to be 4% higher m/m. Cargo traffic grew 6ppts less than cargo volume carried (+7% y/y) which suggests regional trade was stronger than long-haul.

Cargo load factor (CLF) fell 1ppt y/y, 2ppts m/m to 64%, lower than its Nov avg of 69% in the past 22 years. CLFs fell the most on W Asian/African and European routes, down 3ppts y/y to 61% and 72%, followed by 2ppts y/y decline on N & SE Asian routes to 58%.

Separately, IATA notes “it is probable there has been (some) substitution from premium travel to economy as businesses cut costs. This changing seat class mix will undermine yields. Moreover, stagnant int'l trade and declining business confidence points to further weakness in business travel. Given that jet fuel prices have not fallen from 3Q11 levels, this implies 4Q11 will be more challenging for airline profitability than 3Q”.
SIA, which has substantial exposure to corporate travel, is likely to be affected.