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Singapore Air may reverse flight cuts as demand rises

Singapore Airlines Ltd, Asia's third-biggest carrier by sales, told investors it may reverse some planned flight cuts to the US and Japan, as air travel demand starts showing signs of recovery.

The airline told analysts and investors last month it filled more than 70 percent of its seats for flights exiting Singapore in the first half of December, bolstered by holiday travel.

"SIA thinks that it may not have to cut capacity by as much as it originally planned," wrote Peggy Mak, an analyst with UOB-Kay Hian Research, in a report after the briefing. She changed her stock recommendation to "buy" from "sell," on Dec. 26. "A review will be made in February," Mak wrote.

The airline's stock has risen about 22 percent in the past month, the fifth-best performer on the benchmark Straits Times Index, as investors bet cheaper oil prices and a recovery in demand may spur profit. The airline said in October it may report its first annual loss since going public in 1985, blaming a drop in air travel in the wake of the Sept. 11 terrorist attacks.

"All the cutbacks we've put into place, or will put into place, are always under review," said Innes Willox, a spokesman for Singapore Airlines, yesterday. He declined to elaborate.

Other carriers are also reporting traffic picked up in December, prompting a rally in their shares. China Airlines (華航), Taiwan's largest carrier said it filled more seats in the first 20 days of December than for all of November, and Korean Air Co reported the same pickup on its international flights. EVA Airways Corp (長榮航空), Taiwan's No. 2 airline, said yesterday it expects to return to profit this year as traffic rebounds, and the nation's economy recovers from recession.

Shares of Singapore Airlines rose for a fourth day, gaining as much as 3.4 percent to S$12.20. Korean Air shares rose as much as 4.2 percent to 8,750 won. EVA shares fell 0.5 percent to NT$10.05, while China Airlines' shares dropped 0.8 percent to NT$13.05.

Singapore Airlines said in November it will reduce seat percent from Jan. 13 to April 30, to adjust to the sag in sales.

On Wednesday, the airline said it filled 66.9 percent of total available seats in November, or a 9.1 percentage point decline from a year earlier. That compares with October's 63.2 percent.

One source of optimism for airline shares is a revival in the electronics industry, a main source of airline freight.

Three price increases by Korea's Hynix Semiconductor Inc, the third-biggest maker of computer memory chips, within a month, are raising hopes demand may expand for computer-related parts.

The gains in chip sales may help airlines that ship such parts for manufacturers, including Taiwan Semiconductor Manufacturing Co (台積電) and Singapore's Chartered Semiconductor Man-ufacturing Co (特許半導體).

The South Korean government today forecast the country's chip exports will rise 19 percent this year, after falling 45 percent last year, as US orders recover.
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