SIA's net profit feared to nosedive to $485m in 2017

How badly will SIA Engineering and SATS be hurt?

The steep decline in passenger traffic of Singapore Airlines (SIA) could trickle down to SATS and SIA Engineering (SIAEC), as analysts forecast a whopping decline in the airline's net profit.

According to UOB Kay Hian analysts, SIA is expected to post a net profit of $485 million for 2017, 42% lower than the estimated $831 million.

In August, SIA recorded 5.5% and 6.8% declines in passenger carriage and passenger traffic, respectively.

This would give out negative implications for SATS and SIAEC, they argued.

They noted that SIAEC derives 66% of its revenue from SIA.

"If SIA cuts capacity in response to the weak loads, this could impact SIAEC’s line maintenance revenue," the analysts explained.

Meanwhile, SIA's weak passenger traffic could pose negative implications for SATS, especially if traffic slows down further in September and November due to concerns over the Zika virus.

"More importantly, SIA’s weak loads on the European routes could lead to lower unit meals for SATS. This is a weighted measure, taking into account the higher value-added meals served on the front-end, which is likely to have declined in August," the analysts said.

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