Singapore Air Profits Jump On Lower Oil Prices

May 12, 2016

Singapore Airlines reported full-year net profit that more than doubled to SGD$804 million (USD$586.7 million), mainly on lower oil costs.

Operating profit increased 66.1 percent to SGD$271 million, the airline said in a stock exchange submission.

The carrier, a barometer of the health of Asia's competitive airline industry, said that lower net fuel costs compensated for weaker yields but warned of difficult conditions ahead.

"The Group is contending with a challenging operating environment in key markets, caused in part by weak economic activity and relatively rapid growth in capacity, evidenced by increasing promotional fare activity," it said.

The SIA group operates a full-service carrier, two low-cost subsidiaries and a cargo unit.

The carrier said its bottom line was buoyed by a one-off SGD$117 million refund to its cargo subsidiary, and profits at its low-cost units Scoot and Tigerair.

Net income for the fourth quarter was SGD$224.7 million, up SGD$184 million from the year before.

Full-year group revenue was SGD$15.23 billion, down 2.2 percent on lower passenger revenues at the parent airline business and the cargo division.

Expenditure fell SGD$609 million, or 4 percent, to SGD$14.55 billion, with fuel costs declining by SGD$1.05 billion due to a drop in fuel prices, SIA said.

Airlines around the world have reaped the benefits of a 30 percent drop in jet fuel prices over the last year.

The main SIA brand's operating profit was up 42 percent at SGD$485 million. Scoot posted a profit of SGD$28 million, reversing a loss of SGD$67 million, and short-haul budget unit Tigerair posted a profit of SGD$14 million versus a loss of SGD$9 million.

SIA Cargo remained a drag on the company with a loss of SGD$50 million, worse than the SGD$22 million loss the year before, reflecting a broader weakness in the global air freight market.

SIA cautioned that the outlook remains cautious for air cargo amid China's economic slowdown and ongoing uncertainty surrounding the global economy.

The company's business hinges on using its hub at Singapore's Changi Airport to connect passengers within Asia and to Europe, Australia and the United States.

Profitability of Asia-European services have been under pressure since the 2008 financial crisis due to tepid economic growth in the continent, and competition from Gulf carriers that have taken market share from legacy airlines in both continents.

(Reuters)