Singapore Air Transport – Jun26 – Jet fuel volatility persists July 13, 2026 8

  • In Jun26, the aviation sector delivered a steady performance. SATS led the rally at 14.2%, followed by Singapore Airlines and SIA Engineering at 11.6% and 7.3% respectively. CAO was down 1.1%.
  • Singapore jet fuel prices are trending at US$115/Bbl from a high of US$240.5/Bbl in Mar26. However, prices are still volatile with renewed attacks. SIA has been relatively insulated due to its i) dual hedge structure on both Brent crude and jet fuel (hedged 35% on jet fuel, 14% on Brent crude for 2Q FY26/27), ii) rerouted demand for Asia-Europe flights stopping over in Singapore, iii) cargo flown revenue benefitting from rising cargo yields (global freight rate up 41% YoY to US$3.40/kg), iv) Scoot likely capturing the budget travel demand from regional LCCs that grounded aircraft during the conflict.
  • We maintain a NEUTRAL stance on air transportation amid the uncertain resolution of the US-Iran conflict. With no clear timeline for complete resolution despite the interim peace deal, the outlook of jet fuel price remains uncertain.

 

Outlook
The US-Iran peace deal pushed Singapore jet fuel prices down by c. 50% to below US$115/Bbl
from its peak. However, prices remain around 33% above 2025 average (2025: c. US$90/Bbl).
As seen from Figure 1, operators such as Cathay Pacific, Singapore Airlines, Japan Airlines and
ANA are the region’s better hedged operators. Comparatively, China’s Big Three, consisting
of Air China, China Southern and China Eastern are largely unhedged. Hedged carriers
absorbed less of the fuel spike and could hold fares steadier, while unhedged carriers like
China’s Big Three faced a near-doubling in fuel costs in 2Q26, forcing more aggressive fare
and surcharge hikes to protect margins. Going into 2H26, unhedged carriers remain the most
exposed if the 8 Jul ceasefire breakdown pushes jet fuel prices back up sharply, while hedged
carriers retain some protection.

 

 

 

 

 

 

 

 

In the cargo segment, Middle East airlines typically carry up to 80% of India to Europe air
cargo, and 25% to 30% of China/SEA to Europe air cargo. Their partial grounding pulled that
capacity out of the market, pushing Asia to Europe spot rates to US$5.26/kg in late June (up
38% YoY). Carriers with a sizeable proportion of cargo flown revenue (Cathay Pacific: 20%,
Eva Air: 25%, China Airlines: 32% of total revenue) will likely capture this via belly hold
capacity. SIA’s smaller cargo flown revenue exposure (11% of total revenue) makes it a
secondary beneficiary. We believe cargo rates will normalise into 2H26 as more capacity
returns.

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