The International Air Transport Association (IATA) recently announced that passenger traffic demand remained robust in April. Total traffic (measured in revenue passenger kilometres (RPK)) rose 45.8% versus April 2022. Globally, air traffic is at 90.5% of pre-COVID levels, led by domestic traffic which has surpassed April 2019 levels by 2.9%.
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In the near term, further travel demand recovery is likely to be supported by the peak travel season in the Northern hemisphere, as well as a more meaningful recovery in outbound travel from China in the second half of 2023.
As easing inflation and declining jet fuel prices moderate cost pressures, strong air traffic demand may sustain for a longer period of time, presenting further upside potential for airlines.
SIA’s brand promise remains in-tact
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SIA also announced that it will be providing free unlimited in-flight Wi-Fi to KrisFlyer members flying in economy and premium economy classes from 1 Jul 2023.
We think that SIA’s responsiveness underscores its commitment to service excellence, and is a long-term positive for its brand image. This could prove to be a powerful asset and lend SIA greater competitiveness and resilience in defending its market share when demand and prices begin to normalise.
Separately, we also look favourably on SIA’s planned joint venture with Garuda Indonesia, which will expand SIA’s network connectivity, in line with its longer-term strategy.
Risk-reward profile has become more balanced
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Above is an excerpt from a report by OCBC Investment Research. Clients of OCBC Securities may be the first to access the full PDF report @ https://www.iocbc.com/.
