Singapore Airlines reports fiscal 1Q net profit dropped 21 percent

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

Singapore Airlines reported Wednesday its fiscal first quarter net profit dropped 20.7 percent, or S$29 million, on-year to S$111 million on higher estimated losses from associated companies, including Virgin Australia.

Total revenue for the quarter ended 30 June rose 6.7 percent on-year, or by S$251 million, to S$4.10 billion, the carrier said in a filing to SGX.

The increase was due to flown revenue rising by S$226 million, or by 6.3 percent, with passenger flown revenue improving by S$271 million, or 8.8 percent, on a 6.6 percent increase in capacity, Singapore Airlines said. That amount was partly offset by an 8.4 percent decline in cargo-flown revenue as both cargo yield and cargo load factor fell on weak cargo demand amid trade uncertainties.

Total expenditure rose 6.9 percent on-year in the quarter to S$3.90 billion, as non-fuel costs increased due to capacity expansion and fuel costs rose on increased volume, capacity expansion and a stronger U.S. dollar, the airline said.

Operating profit for the carrier rose 3.6 percent on-year in the quarter to S$200 million, SIA said.

The parent airline company’s operating profit rose 28.2 percent on-year to S$232 million and SIA Engineering’s operating profit rose 80 percent on-year to S$18 million, SIA said, adding that was offset by SilkAir reporting an operating loss of S$16 million and Scoot posting an operating loss of S$37 million.

SilkAir was impacted by the grounding of its six 737 MAX 8 aircraft during the period. Measures taken to mitigate the effects, contained the reduction in capacity to 1.6 percent, SIA said. “This capacity reduction, together with a 2.9 percent yield contraction, contributed to a S$10 million decline in revenue.”

In its outlook, Singapore Airlines said passenger bookings were tracking closely with capacity growth, with support from premium cabin traffic in key markets.

But it also expressed some caution ahead.

“Air freight demand has softened amid ongoing trade disputes and uncertain global economic conditions. These headwinds also cloud the outlook for passenger demand over the longer term,” SIA said. “The group will actively capture revenue opportunities and exercise cost discipline to boost profitability in this challenging macroeconomic environment.”

SIA added it expected fuel-price volatility would persist near term, but that its strong hedge position would mitigate the impact; it said it had hedged 79 percent of its fuel requirements at a weighted average price of US$75 a barrel for the second quarter.

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