UPDATE: Singapore Airlines fiscal 3Q net profit falls 27 percent as higher fuel costs offset revenue rise

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

This article was originally published on Thursday, 14 October 2019 at 19:53 SGT; it has since been updated. 

Singapore Airlines reported on Thursday its fiscal third quarter net profit fell 27 percent on-year to S$284.1 million as a sharp increase in fuel costs offset a rise in revenue. The results beat a forecast from Daiwa.

Revenue for the quarter ended 31 December increased 6.50 percent on-year to S$4.34 billion, on growth in passenger demand, with passenger traffic for the group up 8.0 percent, outpacing capacity growth, it said in a filing to SGX after the market close on Thursday.

Net fuel costs jumped 22.2 percent on-year to S$1.25 billion, the carrier said. For the fourth quarter, it said it had hedged 80 percent of its fuel requirements at a weighted average price of US$74 a barrel. The jet fuel price was at US$77.75 a barrel last week, after nearing US$100 a barrel late last year, according to IATA data.

That was exacerbated by the share of losses from joint ventures, particularly NokScoot, which was hit by the higher fuel prices and intense competition, SIA said.

Operating profit was S$388 million for the quarter, down 14.5 percent on-year, it said.

Daiwa forecast fiscal third quarter adjusted net profit of S$266 million and operating profit of S$340 million on revenue of S$4.24 billion. Maybank Kim Eng had estimated third quarter core net profit of S$316 million.

“Against a challenging operating environment, the group’s suite of services and products launched over the past year, including new non-stop services and cabin upgrades, helped enhance the customer experience and grow revenue, while realizing operational and cost efficiencies,” SIA said in the statement.

The carrier issued a cautious outlook.

“Overall passenger bookings in the forward months are tracking capacity growth, however uncertainties surrounding U.S.-China tariffs and their consequent effects on global trade flows, as well as Brexit, are clouding the overall demand outlook for both passenger and cargo,” the airline said.

In the third quarter, the parent airline company’s operating profit increased by S$3 million on-year to S$369 million for the quarter, it said.

But SilkAir saw its operating profit drop to S$7 million for the quarter from S$19 million in the year-ago period, as higher fuel costs outpaced a 3.8 percent increase in passenger carriage, SIA said.

Scoot’s operating profit tumbled to S$1 million from S$43 million in the year-ago quarter, despite passenger flown revenue rising by 10.1 percent, boosted by passenger traffic growth of 12.1 percent, as those gains were offset by higher fuel costs and the costs of expanding capacity, SIA said.

SIA Engineering’s operating profit fell to S$16 million for the quarter, from S$19 million in the year-ago period, the filing said.

“The decline was mainly due to a contraction in revenue on lower airframe and fleet management activities,” SIA said.

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