Thursday, October 25, 2012

SIA

SIA: announced a US$7.5b list price order for the parent airline and another with a min list price of US$4.9b for its long haul low cost subsidiary Scoot. The first of these aircraft for Scoot deliver from 2014, and SIA’s aircraft delivery is from 2017, hence near term financial impact is not meaningful. However the deal requires Airbus to re-purchase SIA’s remaining A340-500 from next yr, which will see it moth-ball non-stop business class only services from SIN to EWK and LAX, which have been suffering from poor loads, fares and the high cost of fuel. Credit Suisse sees the route cancellation as a tacit admission of the difficult trading conditions that will be evident in SIA’s 2QFY13 numbers on 2 Nov, particularly given its premium mkt exposure. The house keeps its Neutral rating and TP $11.40.

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