SIA boosts net profit but warns times are still tough.

November 07, 2017
Singapore AirlineRatings airline of the year
A Singapore Airlines A380. Photo: Steve Creedy

A strong lift in operating results saw the SIA Group Tuesday post a 32 per cent increase in 2017-18 first-half net profit even as it warned of continuing headwinds.

The Singaporean airline company predicted it would continue to face stiff competition  and yields would remain under pressure.

It also warned fuel prices were expected to be volatile in coming months, although it has hedged some of its fuel requirements.

“Headwinds remain as competitors mount significant capacity in key markets,’’ SIA said in its outlook.” Yields continue to be under pressure, despite some stabilisation in recent months.”

SIA’s interim net profit rose $S103m to $S425m ($US312m)  as its first-half operating profit soared 69.9 per cent year-on-year to $S513m

The SIA Group includes Singapore Airlines, SilkAir, Scoot as well as cargo and engineering operations.

Second quarter results were particularly strong with the group net profit almost tripling to $S190m.

Singapore Airlines proved a major contributor to this result, with the operating profit for the quarter doubling to $S170m. This saw its half yearly figure rise from $276m in 2016-17 to $411m in the current year.

SIA said was due to one-off items and an increase in passenger carriage that boosted revenue and saw passenger load factor rise 2.8 percentage points year-on-year to 80.9 per cent

The situation was not quite as rosy at SilkAir, which reported a $S23m deterioration in operating profit to $S21m as the costs of adding capacity outstripped revenue gains.

Scoot recorded a $S12m operating profit decline, to $S5m, for similar reasons.

However, SIA Cargo saw a big turnaround from a $S45m first half loss in 2016-17 to a $S32m profit in the latest half as tonnage and yields both grew. The operating profit at SIA engineering was also up, rising $S15m to $S38m in the latest half.

Despite the warning on competition and yields, SIA noted it was taking delivery of modern, fuel efficient aircraft and expanding its network in both the low-cost and full-service markets.

Read: Singapore Airlines’  striking $US850m A380 upgrade.

“The significant investment in new technology aircraft, as well as the recent launch of new cabin products, underscore our commitment and confidence in the future of premium full-service air travel,’’ it said.

“The successful completion of the merger of Scoot and Tigerair under the Scoot brand during the first half has also strengthened the Group’s fast-growing low-cost operations.

“The Group will continue to exercise nimbleness and flexibility in deploying the various vehicles in its portfolio to cater to opportunities in the appropriate markets. “

Read: Singapore Airlines wins major awards.

The company said its three-year transformation program was on track, with the first wave of initiatives underway.

“The Group is identifying new opportunities for revenue generation, re-structuring of its cost base and enhancement of organisational effectiveness under the programme,’’ it said.