Whalesbook
Profit Dips Sharply on Air India Losses and One-Offs
Singapore Airlines Group's reported net profit for fiscal year 2026 fell sharply by S$1.594 billion to S$1.184 billion. This substantial decrease was largely driven by one-off accounting impacts, not a faltering core business. The primary reason was the absence of a non-cash gain of S$1.098 billion recognized in the prior year following the Air India–Vistara merger completion. Adding to the impact, the group accounted for S$846 million in losses from its associate Air India over the full fiscal year, a significant increase compared to the four months accounted for in the previous reporting period. These factors heavily influenced the bottom line, creating a disconnect between reported net income and the airline's operational performance.
Record Revenue and Strong Operating Profit Show Underlying Strength
Operationally, Singapore Airlines demonstrated considerable strength. Revenue climbed to a record S$20.522 billion, marking a 5% increase year-on-year. This performance was driven by strong passenger demand, higher fares, and fuller flights, enabling the group to carry a record 42.4 million passengers. Operating profit surged by an impressive 39% to S$2.375 billion, showing effective capacity management and favorable market conditions. Despite a marginal 1.8% increase in total expenditure to S$18.148 billion, mainly due to higher non-fuel costs from capacity expansion and inflationary pressures, the airline managed its expenses well enough to translate top-line growth into significant operating profit improvement.
Asian Carriers Face Rising Costs Despite Passenger Demand
While Singapore Airlines navigated its results, the broader Asian airline sector in early 2026 showed strong passenger demand but faced profitability pressures from rising fuel costs and geopolitical uncertainty. Global passenger traffic was projected to grow by 7.3% in Asia Pacific for 2026, yet margins were expected to be compressed by fuel price spikes. Competitors like Cathay Pacific, while not directly comparable on all metrics, maintain a larger fleet of Boeing 777-300ERs and lead in transpacific capacity. Both carriers are highly regarded by Skytrax, with Singapore Airlines ranked second globally in 2026. The industry is also contending with rising non-fuel costs, including labor and maintenance, worsened by pilot shortages and wage inflation.
Air India Investment Weighs Heavily on SIA's Outlook
Singapore Airlines' outlook is shadowed by its investment in Air India. Air India reported a net loss exceeding USD 2.4 billion (SGD 3 billion) for its fiscal year 2026. Singapore Airlines, holding a 25.1% stake, is exposed to these persistent losses, which contributed S$846 million to its own FY26 results. Analysts point to potential further capital injections needed for Air India, which could strain SIA's finances and affect dividends. The company's stock has underperformed the Singapore market, declining 8.5% over the past year. Furthermore, Singapore Airlines' trailing P/E ratio of approximately 17.05 as of early May 2026 is above its 10-year median of 13.52 and the transportation industry median, suggesting the current valuation may not fully reflect the risks associated with its associate investments and rising operational costs. The market anticipates limited upside, with a consensus 'Neutral' rating and average price targets between S$6.60-S$7.00.
SIA Proposes Dividend Despite Air India Challenges
Despite the net profit decline and concerns surrounding Air India, Singapore Airlines proposed a total dividend of 37 cents per share, signaling confidence in its operational strength and financial health. The group's strategic investment in Air India is viewed as a core part of its long-term multi-hub strategy, providing exposure to one of the world's fastest-growing aviation markets. Management is working with partners to support Air India's turnaround, though supply chain issues and high jet fuel prices continue to challenge the airline. The company's operational performance remains robust, driven by sustained travel demand and yield momentum, suggesting that underlying business health is solid.