Singapore Airlines half-year profit down 55.5%

SINGAPORE – Singapore Airlines (SIA) said Thursday, November 6 its half-year net profit plunged 55.5% percent, weighed by heavy losses in budget carrier affiliate Tiger Airways, and warned of a challenging outlook despite falling fuel prices.

The flag carrier, considered a bellwether for the industry, in a statement said net profit for the 6 months to September 30 fell to SG$125.7 million ($100.54 million) from SG$282.4 million a year ago.

Net profit in the second financial quarter to September tumbled 43.4% to SG$90.9 million in the same period the year before.

“The share of results of associated companies fell SG$154 million, largely attributable to the group’s share of Tiger Airways’ loss,” SIA said.

Tiger Airways on October 16 reported a SG$182 million net loss in the fiscal second quarter, compared with a net profit of SG$24 million in the same period last year.

The budget carrier is struggling to survive after its strategy to expand its brand to Australia, Indonesia, and the Philippines failed.

SIA said it will raise its interest in Tiger Airways to up to 56% from 40% currently.

SIA said total group revenue was down 2% to SG$7.59 billion in the 6 months to September owing to “lower incidental revenue” including from the expiry of aircraft leases to Royal Brunei Airlines.

The carrier said it is increasing capacity to Auckland, Melbourne, Sydney, Brisbane, and Christchurch to cater to peak period demand in the summer months of the southern hemisphere.

Still “the operating landscape for the airline industry remains competitive and challenging, as an uncertain global economic climate and geopolitical concerns persist,” said the airline, which is facing stiff competition from Middle East carriers.

“Demand is generally flat, and yields will remain under pressure amid intense competition from other airlines and promotional activities in weaker markets,” it added.

The airline said there had been “a reprieve from cost pressures arising from the decline in fuel prices in recent months.”

Crude oil prices are trading near 4-year lows amid amidst a glut in global supply and price cuts by top global producer Saudi Arabia.

However, SIA said there is concern that the oil price decline is an indication of a slowdown in major global economies which could ultimately hurt travel demand and affect the airline industry.

SIA currently has a fleet of 105 passenger aircraft, including 19 Airbus A380 superjumbos. Its network, along with regional wing SilkAir, plies 99 cities in 35 countries.

The International Air Transport Association on November 4 trimmed its forecast for airline profits this year to $18.0 billion from $18.7 billion. – Rappler.com

*($1 = SG$0.77)