Singapore Air’s Net Profit Drops 55 Percent

May 18, 2017

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Singapore Airlines (SIA) reported a 55 percent drop in full year net profit as a soft fourth quarter hit the overall result.

Net profit for the year to end March was SGD$360.4 million, down from the previous year’s SGD$804.4 million. Pre-tax, the result was a SGD$518.6 million net profit, down from SGD$972.4 million in 2016.

The fourth quarter was problematic with a pre-tax loss of SGD$132.1 million, from a SGD$243.2 million profit in 4Q16. Increased fuel costs were a factor in the loss with a pre-hedging increase of SGD$331 million as average fuel prices rose by 50 percent. This was partly offset by a SGD$288 million reduction in fuel hedging losses in the quarter.

“As fuel remains a significant portion of the Group’s expenditure, the Group continues to hedge its fuel requirements prudently,” the airline said in its results statement.

Revenue for the year fell 2.4 percent to SGD$14.87 billion, a drop of SGD$370 million as yields came under pressure. Expenditure was also down on the previous year, by SGD$312 million or 2.1 percent to SGD$14.25 billion. Ex-fuel costs rose SGD$468 million, however, as the carrier’s budget airlines, Scoot and Tiger Airways added double-digit capacity.

Group airlines carried a shade under 31.6 million passengers during the year, a 3.9 percent lift on 2016. RPK (revenue passenger km) traffic was up 2.6 percent on an ASK (available seat km) capacity increase of 3.6 percent. Load factor edged down 0.8 percentage points to 79.0 percent as a result.

Full service carrier Singapore Airlines reduced ASK capacity and saw an RPK traffic drop, but all other group airlines posted increases. Budget carriers Scoot and Tiger Airways saw particularly strong growth, with traffic up 21.2 percent on a capacity increase of 23.3 percent.

SIA Cargo had a better year, moving into the black to the tune of SGD$3 million, a swing from the prior year loss of SGD$50 million. Cargo load factor rose 1.3 percentage points to 63.2 percent as the 3.8 percent capacity growth was outpaced by a 5.9 percent increase in freight carried. The soft international cargo market helped push yield down 10.7 percent though, contributing to a revenue decline of SGD$89 million.

SIA continued its fleet refreshment, adding two Airbus A350-900s and removing three A330-300s and one Boeing 777-300 during the fourth quarter as leases expired. The airline expects to take delivery of ten A350-900s and three A380-800s during the 2017-18 financial year, and remove two A330-300s, four A380-800s, two 777-200s and one 777-200ER from the fleet, again as leases expire.

“The addition of more modern, fuel-efficient aircraft with new-generation cabin products is enabling the Group to expand its network and enhance its competitiveness in both the full-service and low-cost market segments. With Scoot and Tiger Airways preparing to operate under the single Scoot brand, more synergies are expected within the budget segment, both operationally and strategically,” the airline said.