A Better Investment: Singapore Airlines Ltd or Malaysia’s Largest Airline?

Singapore Airlines Ltd (SGX: C6L) is one of the biggest companies in Singapore’s stock market and is likely one of the most renowned airlines in the world. But, is the company one of the best airline stocks in the region for those who’re interested in the aviation industry?

To get us closer to the answer, we can see how Singapore Airlines’ business fundamentals stack up against that of Air Asia Berhad (KLSE:5099.KL), Malaysia’s largest airline.


Singapore Airlines currently has a fleet size of 107 aircraft. At the end of 2014, AirAsia had 81 aircraft in Malaysia and 172 planes across its entire group. But, as AirAsia is predominately a short-haul low-cost carrier, its fleet is mostly made up of smaller aircraft such as the Airbus A320 and Boeing 737. Singapore Airlines, being a premium airline, holds some of the largest aircraft in the industry in its fleet, including 19 Airbus A380s.

So in terms of asset values, we would be able to see a significant difference. Singapore Airlines has a net property, plant, and equipment (PP&E) value of S$14.1 billion at the end of 2015 while the selfsame figure for AirAsia is ‘only’ RM10.9 billion (S$3.7 billion).


In terms of operational efficiency, AirAsia appears to be the stronger of the two. In 2015, the Malaysian airline managed to achieve a return on asset of about 4.7% whereas Singapore Airlines only managed a mere 1.7%.

Moreover, the low-cost carrier has higher gross and net margins when compared to Singapore Airlines. For the 12 months ended 31 December 2015, data from S&P Global Market Intelligence show that AirAsia has a gross margin of 36.9% and a net margin of 8.6%; in Singapore Airlines’ case, its gross and net margins were just 21.5% and 4.0%, respectively, for the same period.

Given these numbers, Singapore Airlines might have some trouble competing with AirAsia operationally.


Lastly, there is a wide difference between the two companies in terms of their valuation. Singapore Airlines has a market capitalization of S$13.1 billion while AirAsia’s market value is only RM4.8 billion (S$1.6 billion). Singapore Airlines currently trades at 21 times trailing earnings and offers a 1.9% yield (based on the annual dividend in its last fiscal year). Meanwhile, AirAsia offers a similar yield of 1.7% but trades at only 9 times trailing earnings. Interestingly, the two airlines companies are both trading at 1.1 times their tangible book value.

These numbers again signify how much more profitable AirAsia is compared to Singapore Airlines.

Foolish Summary

All told, while Singapore Airlines has more valuable assets, AirAsia is the more efficient company and is also the one with the lower valuation.

While what I’ve shared can be a useful starting point for deeper research, they should not be taken as the final word on the investing merits of both companies. In any case, which of the two airlines would you choose as an investment if you had to pick one? Share your thoughts with us in the comments section below!

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns shares in AirAsia Bhd.