Singapore Airlines warns of turbulence
By Steve Creedy Thu Jul 28, 2016
Singapore Airlines says tougher competition means its outlook remains challenging despite a 74 per cent increase in first-quarter group operating profit to $S193 million.
First-quarter net profit at the Singaporean group rose a whopping 182.4 per cent to $S257m, boosted by a better operational performance, lower fuel prices and a one-off gain through the $142m sale of SIA Engineering’s stake in Hong Kong Aero Services Ltd.
Group revenue fell $S79 million to $3.65 billion as passenger revenue dropped $S75m, mainly due a $S112m fall at the full-service parent airline as passenger yields and carriage fell.
This was partly compensated by better revenue performances at low-cost offshoot Scoot and full-service subsidiary SilkAir, the company said.
Like other premium Asian carriers, Singapore faces increased competition on the premium front from Middle Eastern carriers such as Emirates and on the low-cost side from the explosion of budget carriers.
It has invested in new aircraft such as the Airbus A350 to give a cost advantage and open up new markets and said it would have 11 of the fuel-efficient aircraft flying by the end of the financial year.
SIA also warned of challenges from economic weakness and geopolitical concerns in some markets.
“Competition remains intense with aggressive capacity injection, and yields will continue to remain under pressure,’’ it said “Yields will be further diluted if key revenue-generating currencies depreciate against the Singapore dollar. ‘’
SIA bought all shares in Tiger Airways during the quarter and established a new company, Budget Aviation Holdings, to own and manage Scoot and Tiger.
It said this laid the foundation for the “integration of commercial and operational synergies” between the two low-cost subsidiaries.
It also noted that the cargo market remained soft due to economic uncertainty in Europe and China, with yields expected to remain under pressure because of persisting overcapacity.
“The group’s balance sheet remains strong and will position the group to weather the many challenges ahead,’’ it said.
A breakdown of the first-quarter results saw parent airline reported an operating profit of $S197m, up from $S108m last year,
SilkAir recorded a five-fold increase in operating profit, to $S27 million, compared to the same quarter a year ago and $S14 million boost to revenue, while Scoot reported a small $S1 million profit compared to a big operating loss last year.
Tiger Airways was up $S8 million on last year’s first quarter break-even result while engineering and cargo both recorded losses.
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