OSK REVISES DOWNWARD SIA'S PROJECTIONS

KUALA LUMPUR, Oct 16 (Bernama) -- Singapore International Airlines's
operating statistics for September this year continue to suggest that the worst
may be over but the threat posed by downtrading in air travel and poor premium
traffic still lingers, research house OSK Research said.

OSK said in an analysis of the island-state's national carrier that it was
prompted to revise downward the airline's projections as the company would carry
on with its aggressive pricing and capacity management.

"Nonetheless, we have decided to roll over our valuation to FY3/11 based on
the existing valuation parameters of 0.85x P/B, or -1 standard deviation from
its historical trading band, plus the SATS share entitlement, which translates
into a new fair value of SG$11.98 (US$8.60)," it said.

This implies a downside of 17.2 percent.

SIA, the national airline of Singapore , is among the world's most
profitable airlines.

Its major shareholder is the government's investment arm, Temasek Holdings
(Pte) Ltd, which has a 55.49 percent stake in the airline.

SIA's system-wide passenger load factor improved to 80.9 percent in
September, up 4 percent year-on-year and 2.6 percent higher month-on-month, but
this was mainly attributed to a combination of capacity cuts and promotional
fares.

Premium passenger numbers remained fragile, with corporate flying being held
back by a very modest rise in cross-border business activities.

During the month, OSK said the overall number of passengers carried by SIA
dipped 10 percent over the same month last year to 1.4 million.

The airline is monitoring traffic movements and making the appropriate
adjustments to match capacity to forward demand.

"We have witnessed a constant cargo load factor (CLF) since SIA implemented
aggressive capacity management," said OSK.

In September, system-wide cargo capacity fell 17.3 percent y-o-y while cargo
traffic (freight tonne km) declined by 14.5 percent, which translates into 63.2
percent in CLF.

"While economies across the globe begin to see signs of recovery, which is
positive to cargo numbers, we are conservative on the possibility of the
division returning to the black in FY10," OSK said.

"The latest operating statistics reaffirm our view that worst may be over
for SIA, but we continue to think the gestation period for premium airlines like
SIA make take longer to return to their days of glory," said OSK.

Recent news reports quoting SIA's CEO as saying there were "double digit"
decline in yields in the quarter ended September prompt us to cut our revenue
passenger km (RPK) estimates from 11 to 10.5 cents for FY10 but by a mere 0.1
cent for FY11.

"We believe that downtrading from business to economy class travel and from
premium class to low cost carriers (LCCs) may persist."

"However, as the carrier has decided to stick to its plan to reduce capacity
by 11 percent through March 2010 to fill up seats, we are tuning up our
systemwide load assumption by 1.5 percent for FY10 to 76 percent and one
percent for FY11 to 77.5 percent," it said.

"All said, we are revising downwards our FY10 projections by 54.5 percent to
SG$174.4 million and FY11 profit by a marginal 0.5 percent to SG$762.4 million,"
said OSK. (US$=SG$1.39)
-- BERNAMA