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Singapore Airlines Q1 profit falls 20.7% on higher expenditure, fuel costs

Singapore Airlines Q1 profit falls 20.7% on higher expenditure, fuel costs

Singapore Airlines' first Boeing 787-10 Dreamliner prepares to land at Singapore's Changi Airport March 28, 2018. (Photo: REUTERS/Edgar Su)

SINGAPORE: Singapore Airlines on Wednesday (Jul 31) reported a 20.7 per cent fall in first-quarter net profit as revenue growth was offset by increased expenditure and a higher share of losses from associated companies.  

The airline's group net profit for the quarter ended June was S$111 million, down from S$140 million a year ago. 

Total revenue rose 6.7 per cent year-on-year to S$4.1 billion from S$3.8 billion, with the increase in passenger capacity dented by a drop in air freight earnings, which declined by 8.4 per cent or S$45 million due to weak cargo demand amid trade uncertainties.

Passenger flown revenue was up S$271 million or 8.8 per cent, led by traffic growth of 8.1 per cent. Revenue per available seat kilometre, a key measure of performance, improved by 1.3 per cent.

Expenditure went up by nearly 7 per cent to S$3.9 billion, with ex-fuel costs rising  by 6.1 per cent, in line with the capacity increase. Net fuel costs, meanwhile, rose by 8.7 per cent, led by an increase in volume uplifted on capacity expansion and a stronger US dollar, said the airline. 

"Fuel price volatility is expected to persist in the near term, but the Group’s strong hedge position will help to mitigate any spike in prices," said SIA.

The SIA parent company's operating profit for the period under review rose 28.2 per cent to S$232 million. However, regional arm SilkAir and budget offshoot Scoot posted weaker results.

SilkAir saw an operating loss of S$16 million against a marginal profit of S$200,000 in the same period last year, primarily due to costs related to the grounding of its six 737 MAX 8 planes.

READ: Singapore grounds Boeing 737 MAX aircraft after 2 deadly crashes

READ: Commentary: The big challenge of winning back trust in the Boeing 737 Max

Scoot also slipped into an operating loss of S$37 million, a reverse of last year's operating profit of S$1 million. The budget carrier's expenditure soared 10.1 per cent on the back of the expansion of its fleet and operations, including higher spend on fuel.

Operating profit for SIA Engineering rose to S$18 million, an increase of S$8 million year-on-year.

During the quarter, an improvement in Indian carrier Vistara’s performance was offset by higher estimated losses from Virgin Australia, SIA said.

Passenger bookings in the next months are tracking closely against capacity growth, while air freight demand has softened amid ongoing trade disputes and uncertain global economic conditions, the company said. 

"These headwinds also cloud the outlook for passenger demand over the longer term," said SIA. 

"The Group will actively capture revenue opportunities and exercise cost discipline to boost profitability in this challenging macroeconomic environment."

The grounding of the 737 MAX 8 fleet has disrupted the airline group's expansion plans, with SilkAir "significantly" affected. To mitigate the disruption in services, parent airline SIA has been operating supplementary flights to SilkAir destinations such as Kuala Lumpur, Yangon and Phuket. 

The airline is in the final year of a three-year transformation plan designed to cut costs and boost revenue.

Source: CNA/nh(hm)


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