SINGAPORE (June 28): Maybank Kim Eng has a ‘hold’ call on air transportation provider Singapore Airlines (SIA), with a lower target price of $10 from its previous price target of $11.50.

This comes after SIA’s Milan-bound (SQ368) Boeing 77-300ER’s right engine caught fire on Monday, upon its return to Singapore’s Changi airport after receiving an engine oil warning message mid-flight. The cause of the incident is still under investigation.

(See Singapore Airlines flight returns to Changi, catches fire, no casualties)

In a Tuesday report, analyst Mohshin Aziz says that although there were no injuries or casualties among the 222 passengers and 19 crew on board, the “graphic” and “gory” pictures of flames engulfing the aircraft’s wing “will definitely put off customers”.

In his opinion, this recent mishap will evoke memories of the incidents that “gloomed Malaysia and Indonesia back in 2014”. Aziz is referring to the three air disasters – involving two aircrafts from Malaysian-based AirAsia, and one belonging to AirAsia Indonesia, an Indonesian affiliate of a Malaysia-based group – which had taken place in 2014 alone.

Resulting negative sentiments among customers that may lead to lower impact yields and take-up rates in the next 2-4 months, says Aziz, who feels that such a consequence is “inevitable”.

As many have already booked their holiday flights in advance, Maybank does not expect any meaningful reductions in SIA’s load factor in July-August, but Aziz says things might “get unpleasant” thereafter.

“The reality is, consumers have unending choices, and the fares are rather cheap nowadays,” he states.

The analyst says the only way for SIA to mitigate this “small crisis” is to provide “deep fare discounts”, a solution which the group’s consumers are likely to welcome more than its shareholders.  

As at 12:08pm, shares of SIA are trading 1.06% higher at $10.51.