SIA yesterday announced further changes to its route network, cutting capacity on various routes, including its all-business class services to Los Angeles and Newark. SIA had previously guided ASK capacity growth to be not more than 1% in FY3/10, and these service cutbacks are part of the ongoing adjustments required to match capacity with demand, in view of the economic downturn. Maintain NEUTRAL on SIA, with an unchanged target price of S$12.60 and no change to earnings. In this down cycle, we believe that SIA will open a chasm of out performance against its full-service peers. Our target price is based on an unchanged P/NTA target of 1x. Dividends likely to be maintained at S$1/share tax exempt because of its strong balance sheet, although our EPS forecasts for the next three years are now below S$1 per share.