Singapore Airlines reports fiscal 4Q net profit dropped 28 percent as fuel costs rose

Singapore Airlines plane on the ground at Singapore’s Changi Airport; taken November 2018.Singapore Airlines plane Changi Airport.

Singapore Airlines reported Thursday its fiscal fourth quarter net profit dropped 27.8 percent on-year to S$202.6 million on a weaker operating performance as higher fuel costs and the costs of increasing capacity offset higher revenue.

In addition, the carrier said it faced increased non-operating costs due to SilkAir’s re-fleeting and restructuring.

Revenue for the quarter ended 31 March was S$4.08 billion, up 1.44 percent on-year, the Singapore carrier said in a filing to SGX after the market close.

Fuel costs increased 7.96 percent on-year to S$1.10 billion, SIA said.

The parent airline company’s passenger flown revenue increased by S$171 million, or 7.0 percent on-year, in the quarter on strong growth in carriage, led by North Asia and Americas, SIA said.

“The cabin mix continued to improve, with growth in demand for Business and Premium Economy cabins, which helped to mitigate adverse foreign currency movements,” the carrier said.

However, the cargo segment’s revenue contracted 6.6 percent on-year on lower loads amid difficult trade conditions in the quarter, SIA said.

SilkAir’s operating profit rose by S$8 million on-year to S$11 million in the quarter, on lower costs and higher passenger traffic, it said.

Scoot posted an operating loss of S$6 million, swinging from an operating profit of S$30 million in the year-ago quarter, on higher expenditure, led by capacity injection, which outpaced revenue growth, the carrier said.

For the full fiscal year, the carrier posted operating profit of S$1.07 billion, down 31.1 percent, after a S$1 billion increase in fuel costs as fuel prices rose 21.6 percent.

Net profit for the full fiscal year dropped 47.5 percent on-year to S$683 million on lower operating profit and higher operating costs, SIA said.

SIA proposed a final dividend of 22 Singapore cents a share, bring the full-year total dividend to 30 Singapore cents a share. That was down from a 40 Singapore cent full-year dividend a year earlier.

The carrier was cautiously optimistic in its outlook.

“Growth in forward passenger bookings in the months ahead is tracking positively against capacity injection, with robust premium cabin demand,” SIA said.

“Most key markets, including those that have seen significant capacity growth such as the U.S., Japan, Indonesia and New Zealand, continue to grow at a healthy pace,” it said, but added China’s international traffic growth rates have softened.

“Notwithstanding the current demand picture, ongoing trade disputes and slowing economic growth in key markets pose uncertainty to the operating environment,” SIA said.

“Fuel cost headwinds may persist on supply risks in the oil market,” it said, but noted it has “significant” fuel hedges.

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