Singapore Airlines should next week post its first quarter of higher profits after five quarters of declining earnings, as it battles high fuel prices by hedging and keeping other costs under control.
The carrier, the world's second-biggest airline by market value, faces what Chief Executive Chew Choon Seng calls "runaway fuel prices" as the price of jet fuel set a record of more than USD$90 a barrel this month.
Industry experts say it owes its strong performance to fuel hedging and tight cost controls, including paying lower salaries than other airlines, fewer staff benefits and no pension liabilities.
The airline, ranked behind Southwest Airlines in market value, spent SGD$1.12 billion (USD$710 million) on fuel for its 90 aircraft in January-March -- more than four times its profit for that quarter -- making it the airline's single-biggest expense.
But even with rocketing fuel costs, the airline has never booked a full-year loss.
Industry group IATA expects airlines worldwide to post losses of USD$2.2 billion this year after losing a total of USD$6 billion last year.
Excluding the sale of planes and property, Singapore Air is expected to report an 18 percent rise in April-June net profit to around SGD$277 million (USD$175 million), according to forecasts.
Singapore's only global brand, whose advertising heavily relies on its "Singapore Girl" flight attendants, made a profit of SGD$266 million (USD$168.5 million) in its January-March fourth quarter.
The company's share price has risen 6.5 percent so far in 2006, beating a 3.6 percent gain by the Straits Times index. Analysts expect little in terms of surprises when Singapore Air releases first-quarter results on Tuesday.
The airline learnt last month that deliveries of the new Airbus A380 superjumbo, which Singapore Air hopes to fly at the end of this year, will be at least six months late.
Singapore Air has since ordered Boeing planes worth USD$4.5 billion, and then followed up with a surprise USD$7.5 billion order for Airbus earlier this month.
The Singapore carrier has also been holding talks with China Eastern about unspecified "possibilities". No result has been announced yet.
Goldman Sachs analyst Jean-Louis Morisot said in a note to investors that he expected the state-controlled airline's results to have only a small impact on its share price.
"The key drivers, in our view, could depend more on SIA's strategic decisions," Morisot said, citing the possible sale of stakes in SIA Engineering and Singapore Airport Terminal Services (SATS), and the prospect of a special dividend as a result of such a deal.
Another driver for the shares could be a possible investment "in high-growth carriers overseas, such as China Eastern Airlines", he said.
Singapore Air shares have outperformed those of Hong Kong rival Cathay Pacific, up 3.9 percent so far in 2006, and Australia's Qantas, which have slumped 24 percent.
