SIA’s Share Price Is Flat — But Is There More Upside Ahead?

Core Viewpoint - Singapore Airlines Limited (SIA) has experienced stagnant share prices despite overall market gains, primarily due to significant declines in profitability driven by losses from its stake in Air India [1][3][17]. Financial Performance - For the six months ending September 30, 2025, SIA's revenue increased by 1.9% year-on-year to S$9.7 billion, but profitability plummeted by 67.9% year-on-year to S$238.5 million, largely due to losses from associated companies [3][17]. - Free cash flow (FCF) decreased significantly to S$817.6 million from S$1.17 billion in the previous year, indicating weaker operating leverage [4][14]. Impact of Air India - SIA's 25.1% stake in Air India has been a major factor in its profitability decline, with Air India reporting a net loss of US$1.15 billion for fiscal year 2025 [5][6]. - The integration of Vistara has further complicated Air India's financial situation, leading to a negative contribution of S$375.4 million to SIA's results from share losses [6][7]. - Management remains committed to the Air India stake, citing potential growth in the Indian air travel market, but challenges persist due to competition and operational issues [7][8]. Passenger Demand and Yields - Passenger numbers for SIA rose by 6.2% year-on-year to 13.7 million, with a load factor improvement to 86.7% [10]. - However, passenger yields decreased by 1.8% year-on-year to S$0.11 per km, and cargo revenue fell by 2.8% year-on-year to S$1.07 billion, indicating pressure on yields despite volume growth [11]. Balance Sheet Strength - As of September 30, 2025, SIA maintained a strong balance sheet with cash and equivalents totaling S$8.5 billion, although borrowings were elevated at S$7.8 billion [12]. - The debt-to-equity ratio remains healthy at 0.70 times, providing a buffer against weaker operating profits [12]. Dividend Policy - SIA declared an interim dividend of S$0.05 per share, a 50% reduction compared to previous years, reflecting a cautious approach in light of the uncertain operating environment [13][14]. - The decline in free cash flow has contributed to the lower dividend payout, indicating management's prudence rather than distress [14]. Future Outlook - SIA's share price may rally if there is clarity regarding Air India's earnings trajectory and if the airline can improve passenger and cargo yields [15][17]. - The company's future performance will depend on its ability to manage costs and navigate the competitive landscape, with Air India's performance being a significant factor [17][18].