2. MACROECONOMIC OVERVIEW
Singapore Airline Ltd is in the Airline industry and has subsidiary companies operating in the Travel and Airline Services sectors . We will focus our analysis on Airline Operations as it contributes to majority of the group’s profit . In addition, the largest portion of SIA’s revenue from external sources comes from Airline Operations . Airline Operations thus has a substantial impact on SIA’s profit margin as well. In this report, we will analyse SIA, and assess if it is a good medium-to-long term investment.
2.1 Industry Outlook & Analysis
Singapore Changi Airport outperformed the world’s average passenger traffic growth of 5.9%, recording a strong 8% growth, with a total of 35 million passenger movements in 2006. The World Travel and Tourism Council’s recent projections also indicate that the demand for travel and tourism worldwide will continue to grow 4.2% annually over the next ten years . Even more visitors are expected to be attracted to Singapore, especially with developments of the Integrated Resort underway. Moreover, the expected opening of Terminal 3 will increase Changi Airport’s capacity to accommodate the surge in tourist numbers . Hence, the Airline industry in Singapore is set for strong growth with the steady increase in passenger traffic.
Jet fuel prices have been climbing steadily and are now over US$95 per barrel . This has resulted in a substantial rise in the expenditure of all airlines. AS such, industry players are now faced with the challenge of transferring minimal costs to consumers, whilst maintaining a healthy bottom line.
2.2 Competitors
Despite SIA being one of the world’s leading airlines, it still faces pressure from competitors like Cathay Pacific, Qantas Airw ...