Singapore Airlines suffered its fifth straight quarter of lower profits due to record fuel costs and said the soaring price of jet fuel was its main headache.
Singapore Air spent SGD$1.12 billion (USD$714 million) on jet fuel for its 90 aircraft in the three months to March -- or more than four times as much as its net profit of SGD$266.3 million (USD$169.8 million) for the same period.
The airline faces "runaway fuel prices", Chief Executive Chew Choon Seng said on Tuesday after it posted a 7.1 percent drop in profit for its financial fourth quarter despite a 12 percent increase in revenues.
Analysts said costly fuel appeared to be the airline's only challenge.
"Everything is going in the right direction for SIA except for fuel. Their yields, non-fuel costs and demand are all looking good," said Peter Drolet of UOB Kay Hian in Hong Kong.
For the full year to March, the state-controlled airline reported a net profit of SGD$1.24 billion (USD$790.5 million) -- down 8.3 percent on the previous year.
Its annual fuel bill was SGD$4.24 billion (USD$2.7 billion), up 57.5 percent from a year ago and higher than ever before.
Even with the rocketing cost of fuel, Singapore Air -- unlike many other airlines -- has never made an annual loss.
Industry experts say it owes its strong performance to fuel hedging and tight cost controls, including paying lower salaries compared to other airlines, fewer staff benefits and no pension liabilities.
Speaking to analysts and reporters, CEO Chew dampened speculation that the airline was preparing to sell its stakes in Singapore Airport Terminal Services and SIA Engineering and return surplus cash to investors or pay a special dividend.
"The board really did discuss it thoroughly, but there was no... consensus of opinions either way," he said, adding that Singapore Air required no funds and that both units were profitable.
UOB Kay Hian's Drolet said the prospect of a big payout following a possible sale of SATS and SIA Engineering was a key reason for holding the stock.
"If SIA decided to divest its units, it would likely pay out 100 percent (of the gain) in dividends. That would provide a significant boost to its share price," he said.
Chew also said that the airline had no immediate plans for its 49 percent stake in Virgin Atlantic, which is majority-owned by British entrepreneur Richard Branson. "We participate actively at board level in Virgin Atlantic... (and) still aim to take it public at some point."
Among the world's most profitable airlines, Singapore Air is 57 percent-owned by Temasek, Singapore's state investment arm. It is worth around USD$10.6 billion on the stock market, second in value to Southwest Airlines of the United States.
Industry group IATA says airlines lost a total of USD$6 billion last year, including big losses by US carriers, mainly due to higher fuel costs. But it expects that figure to narrow to around USD$2.2 billion this year.
