Singapore Airlines must brace itself for sluggish passenger demand growth

It's predicted to drop to just 4%.

According to DBS Vickers, passenger demand for SIA has taken over four years to recover to the levels seen in late 2008, with a firm 6.8% y-o-y increase in RPK in FY13.

However, with a higher base and continued softness in Europe and the US, DBS Vickers projects RPK growth to slow down to 4.9% in FY14 and 4% in FY15 respectively.

Here's more from DBS Vickers:

SIA expects passenger capacity growth of 3%-4% in FY14, which is in line with our 4% ASK growth assumption for FY14.

We have also assumed a 4% ASK growth for FY15.

Meanwhile, cargo demand remains turgid. Overall cargo demand remains well below the levels seen in 2008 and looks unlikely to turn around significantly soon.

Whilst SIA Cargo won’t be adding any more dedicated freighters soon, its capacity will increase along with passenger capacity, so we are looking at a c. 4% increase in cargo capacity growth over the next two years.

Assuming a modest improvement in load factor to 64% in FY14 and FY15 from 63.4% in FY13, we project cargo carriage to grow 4.9% in FY14 and 4% in FY15.

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