Higher earnings elude SATS as Changi Airport's outlook dims

Overcapacity issues stifle passenger growth.

As goes Changi Airport, so goes SATS. The gateway solutions provider should brace for muted earnings growth this year, as passenger and cargo movements at Changi Airport continue to be impacted by the regional supply glut.

According to OCBC, SATS generates 82% of its total revenue from Changi. The airport, however, has lagged behind its peers in terms of growth: From January to July this year, passenger numbers at Changi grew at a mere 0.7%, compared to the regional average of 7.1% for Asia Pacific.

"Its core business segments depend on the number of passenger movements, airfreight movements as well as number of aircraft movements at Changi Airport," said the report.

Despite domestic headwinds, OCBC expects SATS to continue its drive to increase market share by investing in automation.

"[Automation] allows for sustainable reduction in staff costs, which also leads to increase in operating leverage. Even though overall airfreight industry growth is still relatively muted, SATS has been recording an increase in its market share in cargos which commands higher margins," the report noted.

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