Singapore Airlines fiscal 1Q net profit tumbles as fuel prices climb

Singapore Airlines boarding gate; July 2018Singapore Airlines boarding gate; July 2018

Singapore Airlines reported on Thursday that its fiscal first quarter net profit tumbled 58.7 percent on-year to S$139.6 million as fuel prices climbed in the quarter and amid year-earlier one-off items.

Excluding the one-off items in the prior year, group net profit would have fallen by $53 million, or 27.5 percent, it said.

Fuel costs at the group level climbed to S$1.079 billion in the quarter ended 30 June, up from S$925.7 million in the year-earlier quarter on a 39.3 percent increase in the average fuel price, the company said in an SGX filing after the market close on Thursday. Half of the increase was alleviated by hedging gains of S$158 million, compared with hedging losses a year earlier, it said.

Other costs also rose by S$38 million, or 1.5 percent, in the quarter, partly on the expansion of SilkAir and Scoot, it said.

The SIA Group’s operating profit for the fiscal first quarter was S$193 million, down 52.3 percent from the results for the year-earlier quarter, which were restated due to accounting rule changes, the filing said. It noted that the year-earlier quarter included non-recurring revenue of S$175 million related to KrisFlyer breakage rate adjustments and compensation for changes in aircraft delivery.

Excluding the non-recurring items, operating profit for the quarter would have fallen 16.1 percent on-year, the filing said.

Beating estimates?

UOB KayHian had estimated that SIA’s net profit would fall 61.7 percent on-year to S$90.0 million, with total operating profit of S$109.4 million, down 61.0 percent on-year. Maybank KimEng had estimated fiscal first quarter core net profit of S$251 million, up 39 percent on-year.

Group revenue for the quarter was S$3.844 billion, down 0.5 percent on-year, or by S$20 million, as the rise by S$178 million in passenger and cargo flown revenue offset the year-earlier non-recurring items, while the engineering services segment’s contribution fell by S$19 million on-year on lower airframe and line maintenance activities, it said.

The increase in passenger-flown revenue was on an 8.3 percent traffic increase, amid a 3.2 percent decline in passenger yield, while cargo flown revenue rose 6.0 percent on-year, or by S$30 million, despite a 3.5 percent decline in loads carried as cargo yield rose 9.9 percent, it said.

Among the group’s carriers, operating profit for the parent airline company fell 51 percent on-year in the quarter S$181 million on the absence of the year-earlier non-recurring revenue and as higher flown revenue, which rose by S$117 million, was eroded by higher net fuel costs, it said.

SilkAir reported an operating profit of just S$200,000 in the first quarter, down from S$8 million in the year-ago quarter, even as total revenue rose by S$12 million, or 5.0 percent, as a 15.3 percent increase in passenger carriage was partly offset by a 10.3 percent yield contraction, it said.

Scoot’s operating profit dropped by two-thirds to S$1 million in the quarter, from S$3 million in the year-earlier quarter as passenger traffic growth of 17.1 percent, which contributed to a S$58 million revenue increase, partly offset by a 1.8 percent yield decline and by a expenditure rising by S$60 million, or 16.7 percent, on higher net fuel costs and expanded operation capacity, it said.

SIA Engineering’s operating profit for the quarter fell to S$10 million, down by S$9 million on-year, mainly on lower airframe and fleet
management activities, it said, noting the decline was partly offset by foreign exchange gains, compared with losses a year-earlier, and by lower subcontract services costs.

In its outlook statement, the airline was cautious.

“Passenger traffic is expected to grow in the coming months, although competition in key operating markets persists. Costs remain under pressure, especially from higher fuel prices,” it said. “Cargo demand in the near term is steady despite concerns over global trade tensions, the escalation of which could potentially have a longer-term impact on air cargo demand.”

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