The airline has never been run better. The stock already prices that in.
The operating franchise is the strongest it has been. At 1.34 times post-dividend book, the share price already assumes peak-cycle returns and a contained Air India.
Disclosure: I hold SIA shares, with an entry price of about S$7.20. At S$6.68 the position is roughly 7% under water.
Key data
| Metric | Value |
|---|---|
| Share price (7 Oct 2026) | S$6.68 |
| 3-month range | S$6.46 – S$7.92 |
| Shares outstanding | ~3.15 billion |
| Market capitalisation | ~S$21.1 billion |
| NAV per share (30 Jun 2026) | S$5.26 |
| NAV per share after August final dividend (my estimate) | ~S$4.97 |
| Price-to-book (reported / post-dividend) | 1.27x / 1.34x |
| FY25/26 EPS (reported) | 38.4 cents (P/E 17.4x) |
| FY25/26 EPS excluding associates (my estimate) | ~63.8 cents (P/E 10.5x) |
| EV / FY25/26 EBITDA | ~4.7x |
| FY25/26 dividend | 37 cents (27 ordinary + 10 special), 5.5% trailing yield |
| Net debt incl. long-tenor deposits (30 Jun 2026) | ~S$0.27 billion |
Financial year ends 31 March. FY25/26 = April 2025 to March 2026; Q1 FY26/27 = April to June 2026.
Summary view
Singapore Airlines (SIA) is a well-run airline priced as though the conditions of FY25/26 will repeat. They are unlikely to.
FY25/26 was the best operating year in the company’s history: record revenue of S$20.5 billion, operating profit up 39% to S$2.4 billion, and a group load factor of 87.7%. That year also had falling fuel prices and hedging gains. Net profit still fell 57% to S$1.18 billion, because of S$828.5 million of associate losses, almost all from Air India, and the absence of the prior year’s S$1.1 billion Vistara accounting gain.
The first quarter of FY26/27 removed the fuel tailwind. Revenue rose 19.3% to a record S$5.7 billion, yet operating profit fell 74% to S$106 million and SIA reported a S$76 million net loss, its first quarterly loss since the pandemic.
The valuation question is simple once framed through book value. At S$6.68 the stock trades at about 1.34 times estimated post-dividend book. To compound at 10% a year from that multiple, SIA must sustain a return on equity of roughly 12%. That is close to what it earned in FY25/26 excluding Air India, with fuel near US$90 per barrel. The current price therefore discounts the best recent year, without the Air India drag, indefinitely.
My view is neutral on the business and negative on the price. I hold from about S$7.20, roughly 7% under water, and I would not add at S$6.68. The levels at which I would add are set out in the bottom line.
Q1 FY26/27: pricing held, cost did not
The headline loss obscures how well SIA priced through the fuel shock. The problem sits below revenue.
| S$ million | Q1 FY26/27 | Q1 FY25/26 | Change |
|---|---|---|---|
| Revenue | 5,714 | 4,790 | +19.3% |
| Net fuel cost | 2,253 | 1,262 | +78.5% |
| Non-fuel cost | 3,356 | 3,124 | +7.4% |
| Operating profit | 106 | 405 | -73.8% |
| Net profit / (loss) | (76) | 186 | n.m. |
| EBITDA margin | 12.3% | 21.2% | -8.9 pts |
Revenue recovered about 91% of the fuel increase. Passenger revenue added S$720 million and cargo revenue S$178 million, against a S$991 million rise in net fuel cost. Group passenger yield rose 12.0% to 11.2 cents per passenger-kilometre. Cargo yield rose 28.1%, helped by disrupted Gulf capacity and demand for semiconductor and data-centre freight.
The residual damage came from non-fuel cost. Non-fuel expenditure grew 7.4%, faster than the 5.9% capacity growth. Together with other items, that took a further S$206 million out of operating profit.
Unit economics turned negative on the passenger side. The breakeven load factor is the share of seats SIA must fill just to cover passenger operating costs. At the parent airline it rose from 80.9% to 87.9%, while the actual load factor was 86.2%. In plain terms, every 100 seats flown needed about 88 paying passengers to break even and carried about 86. A year earlier the cushion was nearly six seats.
Scoot is the weaker link. Its breakeven load factor reached 100.0% against an actual 90.6%, and it posted an operating loss of S$32 million. A low-cost carrier has less pricing room to pass on fuel than a premium one.
Fuel sensitivity and early signs of demand elasticity
Fuel is now 40% of SIA’s cost base, and each US$10 per barrel moves annual operating profit by roughly a quarter of FY25/26’s level.
The sensitivity. In Q1, SIA paid an average of US$193.05 per barrel before hedging, against US$89.37 a year earlier. Hedges brought the effective price down to US$165.32. Gross fuel cost for the quarter was S$2,629 million. Dividing that bill by the price gives about S$136 million per US$10 per barrel per quarter, or roughly S$545 million a year before hedging. That equals about 23% of FY25/26 operating profit of S$2,375 million. The estimate holds volume and the US dollar constant, so treat it as an order of magnitude.
The environment has not eased. Jet fuel is priced on a lag, and industry fuel trackers reported a six-month high in September after a drone attack shut Saudi Arabia’s main Hormuz bypass pipeline. Q2 FY26/27 (July to September) is therefore unlikely to show material fuel relief. I could not find a disclosure of SIA’s hedge cover for the rest of FY26/27; that figure would sharpen this estimate considerably.
Fare increases are beginning to cost volume. SIA’s own monthly statistics show traffic growth falling behind capacity since mid-year:
| Month (2026) | Group traffic (RPK) | Group capacity (ASK) | Group load factor | SIA parent load factor |
|---|---|---|---|---|
| August | +1.5% | +3.5% | 86.4% (-1.6 pts) | 84.7% (-2.2 pts) |
| July | +2.6% | +5.5% | 86.0% | 84.8% |
In August, SIA’s own traffic grew only 0.5% on 3.2% more capacity. Europe load factor fell 5.1 points to 82.3% and South West Pacific fell 3.7 points. Set against a Q1 breakeven load factor of 87.9%, an 84.7% August load factor at the parent airline is the most important number in this note. Unless yields rose further or fuel eased within the quarter, SIA’s passenger operations were likely below breakeven in August.
Air India: an accounting drag with a cash call attached
The Air India stake matters less for the losses it books than for the capital it may now demand.
The scale of the losses. Air India Group lost about ₹22,238 crore (roughly US$2.3 billion) in its year to March 2026, more than double the prior year. Causes include Pakistan’s airspace closure to Indian carriers since April 2025, Middle East disruption, the absence of a fuel hedging programme, and the aftermath of the June 2025 Ahmedabad crash. SIA’s 25.1% share, booked under equity accounting, produced most of the S$828.5 million associate loss in FY25/26. In Q1 FY26/27, SIA’s share of associate losses rose by a further S$41 million year on year. My estimate of the Q1 Air India share is roughly S$160–170 million; SIA does not disclose it separately in the release.
How equity accounting limits the damage. SIA records 25.1% of Air India’s profit or loss against the book value of its stake. PhillipCapital puts that carrying value at about S$1.1 billion as of March 2026. Once it reaches zero, further losses stop flowing through SIA’s income statement, unless SIA puts in new money. At S$150–200 million a quarter, that point is about five to seven quarters away on my arithmetic.
The cash call changes the arithmetic. Air India is reported to be seeking about US$1.5 billion of fresh equity. Tata Sons’ board has approved in principle more than ₹10,000 crore, subject to a business case. SIA’s pro-rata share would be about US$375 million, or roughly S$480 million. That is about 15 cents per SIA share, equivalent to one and a half years of the committed special dividend.
New equity would also reset the carrying value, so SIA would resume absorbing Air India’s losses through its income statement. In effect, shareholders would pay twice: once in cash, then again in reported earnings.
SIA’s stated position is conditional. Reuters reported in September that SIA would seek greater board influence and loss-narrowing requirements before committing, and that Temasek would neither fund nor intervene. SIA’s board has said it will weigh any request against operating cash flow and its own capital needs. The decision has also drawn political attention in Singapore. I read conditional participation as the most likely outcome, but this is unconfirmed.
The strategic case for India remains coherent: a 25.1% stake in one of the world’s fastest-growing aviation markets, and a codeshare network now covering 82 destinations. The question is the price of keeping that option open. Tata’s own chairman has described the turnaround as a project of up to a decade.
Balance sheet and dividend
The balance sheet can absorb a poor year comfortably. The 5.5% trailing yield overstates what shareholders should expect for FY26/27.
Liquidity is ample. At 30 June 2026, SIA held S$9.10 billion in cash plus S$1.38 billion in deposits longer than 12 months, against total debt of S$10.74 billion. Net debt was therefore about S$0.27 billion. Debt-to-equity was 0.65 times, and S$3.24 billion of committed credit lines were undrawn. In FY25/26, operating cash flow of S$5.1 billion covered S$2.6 billion of capital expenditure and S$0.6 billion of lease payments, leaving about S$1.9 billion against S$1.2 billion of dividends.
The fleet is young but the order book is long. SIA operates 220 aircraft with an average age of seven years and 11 months, and has 62 on order, including 31 Boeing 777-9s. The 777-9 programme has slipped repeatedly, which defers capital expenditure but also delays the fuel savings it was meant to deliver.
The dividend has two parts with different reliability.
- The special dividend of 10 cents a year is committed for FY26/27 and FY27/28, “barring unforeseen circumstances”. At S$6.68 that is a 1.5% yield.
- The ordinary dividend of 27 cents was about 70% of FY25/26 earnings per share of 38.4 cents. Dividend cover was 1.0 times. If FY26/27 earnings fall, as Q1 suggests, the ordinary payout is the part at risk.
An income investor buying at S$6.68 for a 5.5% yield is assuming FY25/26 earnings hold. Q1 does not support that assumption.
Valuation
At S$6.68, SIA offers an expected return of 7–8% a year on a mid-cycle ROE, below my 10% hurdle.
Broker views are cautious. PhillipCapital cut its target to S$6.43 with a Neutral rating after the FY25/26 results, citing fuel and Air India. I could not verify a post-Q1 consensus range. The broker targets are not the argument, however; the return on book is.
Why book value is the anchor. Airline earnings swing too widely for a single year’s P/E to mean much, and reported earnings are further distorted by Air India. Book value moves more slowly. The relevant question is what return SIA earns on that book, and what multiple of book an investor can pay while still clearing 10% a year.
The book is lower than it looks. Reported NAV was S$5.26 per share at 30 June. The final dividend of 29 cents, paid on 28 August, removed about S$0.91 billion of equity. Before Q2 earnings, that leaves roughly S$4.97 per share, which puts the stock at 1.34 times book rather than 1.27 times.
The arithmetic. Assume SIA pays out 70% of earnings and retains 30%. If ROE is 10%, retained earnings grow book by 3% a year. The payout of 7% of book becomes a dividend yield of 7% divided by the price-to-book multiple. At 1.0 times book, that is 3% growth plus a 7% yield, or 10% a year. At 1.34 times book, the yield falls to 5.2% and the total to 8.2%.
| Sustained ROE | Price-to-book for a 10% annual return | Implied price (on ~S$4.97 book) | Expected annual return at S$6.68 |
|---|---|---|---|
| 8% | 0.74x | S$3.66 | 6.6% |
| 10% | 1.00x | S$4.97 | 8.2% |
| 12% | 1.31x | S$6.52 | 9.8% |
What ROE is realistic? Reported ROE was 7.2% in FY25/26. Excluding associate losses, I estimate about 12.2%: roughly S$2.0 billion of earnings on average equity of S$16.5 billion. That year combined record load factors, rising yields and falling fuel prices. A 12% ROE is therefore a peak-condition figure, not a mid-cycle one. Brokers have cited a long-run average price-to-book of about 1.08 times, consistent with a mid-cycle ROE nearer 9–10%.
Risks to the view
The main risk to a neutral stance is a fast fuel reversal while fares stay high.
Upside risks
- Fuel normalises quickly. Fares adjust faster upward than downward. If the Strait of Hormuz reopens and jet fuel falls sharply, the 12% yield gain could persist for a quarter or two against lower fuel, producing a margin snapback.
- Gulf carrier disruption becomes durable share gain. Middle Eastern carriers saw demand fall about 14% year on year by mid-2026. If some Europe–Asia and Australia–Europe traffic stays with SIA after the conflict, today’s yields are partly structural, not temporary.
- Air India runs off the income statement. If the carrying value reaches zero and SIA declines to inject capital, the associate drag disappears from reported earnings within about two years.
- Cargo stays tight. Cargo yield of 44.2 cents per tonne-kilometre is 45% above the pre-pandemic level of 30.5 cents. Semiconductor and data-centre freight could keep it elevated.
Downside risks
- A prolonged conflict feeds into demand. SIA itself flags supply-chain and macroeconomic spillover. The August load factor data suggests price elasticity is already appearing.
- Air India requires repeated capital. A first injection rarely ends a decade-long turnaround. Each round reloads the carrying value and the loss absorption.
- Yield normalisation. When Gulf carrier capacity returns in full, the 12% yield gain unwinds, potentially before fuel does.
- The ordinary dividend is cut. At 1.0 times cover in FY25/26, a lower FY26/27 profit makes a smaller ordinary dividend likely. Annoying for income holders rather than dangerous for the business.
Bottom line
SIA is a high-quality airline at a price that leaves no margin of safety.
My entry was about S$7.20. That price assumed more than the business has since delivered, and I am roughly 7% down. I am holding, not adding: the balance sheet does not justify a forced exit, and the price does not justify a larger position.
The trailing yield is inflated by a strong year and a special dividend, and P/E is distorted by Air India, so I anchor on book value. On estimated post-dividend book of about S$4.97 per share:
- S$5.50 (1.1 times book) is where I would look again. It sits near the long-run average multiple and implies about 9.3% a year on a 10% ROE.
- S$5.00 (1.0 times book) is where I would add. It implies about 10% a year on a 10% ROE, my hurdle. It is roughly 25% below the current price, 22% below PhillipCapital’s S$6.43 target, and 23% below the three-month low of S$6.46.
These are demanding levels. They would most likely be reached through a combination of a prolonged fuel shock, a cut to the ordinary dividend and an Air India injection, which is also when sentiment would be weakest.
Things I am watching from here:
- Q2 FY26/27 results in November: whether the parent airline’s load factor stays below its breakeven load factor.
- SIA’s board decision on Air India’s capital request, and the governance terms attached.
- Monthly operating statistics for September and October, particularly the Europe load factor.
- Any disclosure of hedge cover for the second half of FY26/27.
- The interim dividend in November against last year’s 5 cents ordinary plus 3 cents special.
- Brent and jet fuel prices following the September pipeline outage.
The airline is better than the stock price implies it needs to be. The stock price is better than the next two quarters are likely to be.
Sources: SIA results releases for FY25/26 and Q1 FY26/27, SIA monthly operating statistics, PhillipCapital and other broker research, and press reports (Reuters, The Edge Singapore, AIN, Times of India). Estimates marked as mine are my own calculations.
Disclaimer
This is not investment advice. The information may not be accurate. If in doubt, seek professional advice. Do your own research. The author is not responsible for any losses you may suffer from taking a position in any asset mentioned here.