Singapore Air low-yield `bugbear' to benefit on weak dollar

Singapore Airlines will benefit from the decision by the city-state’s central bank to lower the local currency’s appreciation slope as a cheaper Singapore dollar will support inbound tourist arrivals, Morgan Stanley said. About 40% of the airline’s revenue is denominated in US dollars, Australian dollars, the yen, the pound and the euro, likely helping to lift yields for the company, Morgan Stanley analysts led by Daniel Lau and Edward Xu wrote in a note Thursday. The Monetary Authority of Singapore’s announcement Thursday of its move to a neutral policy of zero percent appreciation in the exchange rate is net positive for the city-state’s stocks, said Mikey Hsia, a trader at Sunrise Brokers LLP in Hong Kong. The surprise decision caused the local dollar to decline and dragged down currencies across Asia Pacific.<br/>“A weaker Singapore dollar is likely to lift yields for Singapore Air, which has been a bugbear amid fuel benefit pass-through,” the Morgan Stanley analysts wrote, reiterating the carrier as their top pick in the aviation sector. The airline could benefit from stronger inbound tourism from countries in the Association of Southeast Asian Nations, the Morgan Stanley analysts wrote. Without adjusting for higher passenger traffic growth, they estimated a 1% depreciation in the Singapore dollar would result in a 0.5% increase in revenue for the carrier.<br/>