SilkAir hurt by grounding of 737 MAX planes even as SIA Group posts higher profit

SilkAir hurt by grounding of 737 MAX planes even as SIA Group posts higher profit

Regional carrier SilkAir had a turbulent showing in the first half of the year because of the grounding of its fleet of Boeing 737 MAX 8 planes, even as parent company Singapore Airlines (SIA) Group turned in a higher profit.

SINGAPORE: Regional carrier SilkAir had a turbulent showing in the first half of the year because of the grounding of its fleet of Boeing 737 MAX 8 planes, even as parent company Singapore Airlines (SIA) Group turned in a higher profit.

SilkAir - which will be merged with SIA following a cabin revamp expected to begin next year - reported operating losses of S$19 million for the six months ended September, deepening from a loss of S$3 million in the same period a year earlier.

It also saw a reduction in capacity from route transfers to SIA’s budget airline Scoot.  

All Boeing 737 MAX aeroplanes were grounded in March this year, after two airplanes crashed within months of each other in Indonesia and Ethiopia, killing 346 people.

READ: Boeing to pay 737 MAX crash victims' families US$144,500 each

SilkAir had operated six 737 MAX aircraft before they were grounded in March following the two crashes; they are now at a storage facility in Alice Springs in Australia.

Its outstanding order for another 31 planes - meant to replace its ageing Airbus 320s and 319 - are on hold until further notice. 

SilkAir has had to carry the depreciation costs of the six grounded planes, as well as the costs of keeping those aircraft in a “close-to-ready” state, Mr Stephen Barnes, senior vice president for finance at SIA, told reporters and industry analysts in a briefing on Wednesday (Nov 6).

READ: What we know about Boeing 737 MAX crash and what comes next

The regional carrier also saw its expenditure go up by S$10 million, due in part to expenses related to the 737 MAX as well as higher fuel costs. 

Despite an increase in traffic, SilkAir saw a S$6 million decline in operating revenue. 

SIA POSTS HIGHER PROFIT

SilkAir's troubles did not drag parent company SIA Group down. The group reported a net profit of S$206 million for the first half this year, up from S$196 million in the year-ago period.

Operating profit for the parent airline came in at S$465 million, an increase of 11 per cent from S$418 million.

Its budget arm Scoot, however, posted a S$77 million operating loss in the first half, up from a loss of S$10 million previously, as a decline in cargo revenue and higher expenditure offset results from an increase in passenger traffic.

SIA chief executive Goh Choon Phong said that the group is banking on new revenue streams beyond its core aviation business as part of its digital transformation.

WATCH: SIA-MAS tie-up could help carriers fend off competition, say analysts

KrisShop, the airline’s travel retailer, has been revamped into an e-commerce player. 

The business - which had previously been outsourced - is now incorporated as its own company, 70 per cent of which is owned by SIA, said Mr Goh, adding that KrisShop has “made very good progress” in its new incarnation.  

“In fact we expect by the end of this financial year, KrisShop will be able to yield a revenue in excess of S$60 million for the group,” he said. 

Meanwhile, the previously announced partnership with Malaysia Airlines could take shape within “nine months to a year”, said Mr Goh, noting this is dependent on regulatory approval. 

The two airlines announced last month that they had finalised an agreement, which is expected to see more code-sharing routes between the two, as well as revenue-sharing on flights between Singapore and Malaysia. 

Source: CNA/az(aj)

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