Scoot could boost pricing from the additional routes to enhance profitability for the group.
Singapore Airlines (SIA) could gain 6% or $40m more net profit in FY19 after its reshuffling scheme of some SilkAir flights to Scoot, UOB Kay Hian (UOBKH) noted. By FY20, the transaction could boost the firm’s net profit by 9% or $78m, UOBKH added.
“If Scoot is able to boost pricing or ancillary revenue from the additional routes, then the transfer of such routes could be accretive and group profitability could be enhanced,” the research firm explained, noting that SilkAir’s yields as of H1 FY19 stood at around 90% higher than that of Scoot.
Meanwhile, UOBKH noted that SIA’s ending cash crashed 40% in H1 FY19 despite the group taking on a $1.38b debt
“We expect SIA's full-year total debt to rise by S$2.6b to S$6.9b and interest cost to more than double in FY20 to S$304m,” the research firm commented.
SIA’s reshuffling scheme will affect about 100 SilkAir staff members. According to a Channel News Asia report, SilkAir will be working with said employees for "possible placement opportunities in other SIA stations" and will also work with Scoot, general sales agents and ground handling agents on job options that may be available with them.
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