AVIATION | Staff Reporter, Singapore

Airlines' yields could pressure SATS' prices

SATS is expected to handle 80% of handle throughput in the growing Changi Airport.

SATS Ltd. is poised to benefit from the growth and the addition of Terminal 4 in Changi Airport, but potential pricing pressure also looms for the firm, OCBC Investment Research said.

According to an analysis, Changi Airport's passenger throughput in November grew 8.1% YoY, aircraft movements rose 4.8% and air freight movements surged by 10.7%.

SATS is expected to handle about 80% of the traffic throughput in the airport.

Moreover, the opening of Terminal 4 (T4) on 31 October 2017 will provide more room for longer-term traffic growth for the airport, benefiting SATS as a consequence.

However, it remains unclear whether the pressure on yields faced by airlines will be translated to pricing pressure for SATS.

Here's more from OCBC Investment Research:

Over the longer-term, we remain positive over SATS’ outlook driven by its strategy to diversify out of Singapore as well as into non-aviation business segments, through several overseas partnerships.

More notably, we remain positive on its partnership with: 1) AirAsia as it opens up opportunities for SATS in Indonesia, Philippines and Thailand, and 2) Wilmar to supply quality and safe food in China, enabling it to leverage on Wilmar’s distribution network in China.

In addition, we also like its potential partnership with Turkish Airlines (THY) to provide in-flight catering services to THY and other airlines at Istanbul New Airport. 

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