Closure of runway at Seletar will impact FY09’s earnings

Business Times has reported that Selatar runway will be redeveloped in November for a period of 18 months. The runway will be closed for 14 hours a day and there will be flight restrictions during this period. The move is part of a redevelopment plans to extend the runway to allow for a wide aircraft types to access the Selatar Aerospace Park.


ST Aerospace operates a Hangar at Selatar with a capacity for 13 narrow body aircraft and performs Boeing 757 conversions and other aircraft maintenance works. The company has clarified that some of the conversion and maintenance works will be shifted to Paya lebar and Changi hangars, while C130 military transport related works could be moved to Selatar. Even so, we believe that utilization rate at Selatar could fall in 2009 and that the other bases might not be able to fully take up the slack.

We estimate that Singapore operations accounted for about $600-650m in revenue in FY07. Given that works on the runway will only commence in November, there would be limited impact on FY08. However, FY09, could see at least see a 10% decline in revenue from Singapore operations. We have adjusted our FY09 net profit to reflect that but maintain our Hold recommendation for now.

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