UOB KayHian downgrades Singapore Airlines (C6L.SG) to Hold from Buy and cuts its target price to $15.90 from $18.00 after the carrier's November passenger traffic growth was a "dismal" 1.1% on year.

"For the past two months, growth averaged 0.3% and 4Q is a traditional peak period for SIA. This number does not lend much confidence to SIA's growth prospects."

Notes passenger load factor fell 3.0 ppts in November, double October's decline, while cargo traffic slowed as expected. Says the "much vaunted traffic recovery did not materialise...SIA's profit recovery came on the back of a yield recovery, surge in cargo traffic and lower fuel prices.

The ability to sustain these remains questionable, especially in the wake of ongoing competition from low-cost carriers and the Middle Eastern carriers."

Cuts its FY11 net profit forecast by 1.4% and FY12 by 18.5% on lower traffic growth assumptions.

The shares are off 1.2% at $15.28.