Airlines Asean / SIA

Airlines Asean / SIA: HSBC recently visited Bangkok, KL and Spore and met up with flag carriers Thai Airways and SIA and low cost carriers (LCCs) AirAsia, AirAsia X, Asia Aviation and NOK Air. All the airlines complained of yield declines from excessive narrow-body aircraft capacity growth and rising market fragmentation. While LCCs seem to be becoming a victim of their own ambitious growth plans, full service carriers (FSCs) like Thai Air and SIA are suffering too, either from LCC presence on regional routes or from the aggressive Middle East competition in long haul markets. The house downgrades Thai Air to Neutral from Overweight, as the planned launch of a new competitor Thai Air Asia X is expected to overshadow the potentially strong 4Q. Trading at an attractive 0.9x P/B, SIA is the only Overweight (TP $12.50) in the Asean airlines space for HSBC.