Singapore Air rises after swinging to Q1 profit

Shares of Singapore Airlines rose as much as 2.7% after the carrier swung to an overall quarterly profit from a loss in the preceding three months, but analysts said the outlook for the airline was still challenging.

SIA shares were one of the top%age gainers on the Straits Times Index, which was up 0.57%.

In the fiscal first quarter ended June, SIA earned $78 million, up 73% from a year earlier, thanks to higher passenger carriage. In the previous three months, the airline posted a surprise net loss of $38.2 million due to feeble demand and high jet fuel prices.

Citigroup said the fall in passenger yields show that travellers are becoming price sensitive because of the uncertain macro environment and more choices in the market. It has a ‘sell’ rating and $9.40 target price on SIA stock.

UOB Kay Hian said it expects consensus downgrades for 2013 fiscal year on lower yield assumptions and further losses in the cargo business. It has a ‘sell’ rating and $9.10 target price.
 
J.P.Morgan said SIA’s first-quarter results were better than expected, and the airline’s profitability is likely to improve further in the coming quarters, helped by lower fuel prices.

It added that SIA’s new pricing strategy has helped to boost revenue growth compared to the carrier’s previous strategy of keeping fares high. It has an ’overweight’ call and $13.00 target price on the stock.