SINGAPORE (Nov 21): OCBC Investment Research is keeping its “hold” recommendation on Singapore Airlines with an unchanged fair value estimate of S$10.22.

This despite SIA’s announcing the expansion of its partnership with Lufthansa Group by adding new codeshare destinations.

The two airlines in November last year already signed a wide-ranging partnership agreement to operate flights between Singapore and key routes in Europe on a joint venture basis.

OCBC lead analyst Eugene Chua says the agreement included “scope for cooperation in other key markets such as Southeast Asia and Southwest Pacific”

Despite the improved connectivity between SIA and Lufthansa, Chua believes the joint venture “may help mitigate but is unlikely to overcome the challenges SIA is currently facing”.

In the latest operating results in Oct, SIA saw passenger traffic growth fall below passenger capacity growth across all its passenger airlines.

Consequently, overall passenger load factor (PLF) fell 2.1 percentage points y-o-y to 76.7% in Oct.

“We expect the weak yields environment to persist on overcapacity and aggressive expansion by the Chinese carriers amidst tepid economic growth conditions,” says Chua.

As at 11.32am, Singapore Airlines is trading 1 cent higher at S$9.72.