Higher costs could trim SIA's profits by 15%

The airlines will be forced to lift prices by 1% to cover expenses.

UOB Kay Hian said Singapore Airline's (SIA) cargo yields could increase by much more than their estimate of 5.1%, as seen in the numbers reported by Taiwanese carriers.

However, if landing fees rise by 30% out of Singapore, this could reduce their 2019 net profit estimate by 15%.

The broker said SIA must raise average ticket prices by 1% to make up for the rise in expenses.

"Moreover, airline subsidiaries are expected to underperform the parent airline if yields do not rise in tandem with unit costs," said UOB Kay Hian analyst K Ajith.

In comparison, landing and parking charges for the parent airline rose 4.8% YoY and accounted for more than 5.9% of the total costs in the first half of 2018.

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