Massive hedging, forex losses erode SIA’s profits in Q3

It lost $216m after buying fuel for US$116 per barrel.

Singapore Airlines was unable to cash in on the collapse in oil prices after hedging losses eroded its bottom line in the third quarter.

In a release to the SGX, SIA stated that it had hedged 65% of its jet fuel requirements at an average price of US$116 per barrel, leading to a hedging loss of $216 million compared with a gain of $48 million last year, so the average jet fuel price after hedging was 1.9% lower year-on-year.

However, this benefit was more than offset by the stronger US Dollar against the Singapore Dollar. Consequently, fuel costs increased by $8 million or 0.6% year-on-year.

Other expenses excluding fuel costs increased $39 million or 1.7%, largely attributable to higher exchange losses stemming from the strengthening of the US Dollar against the Singapore Dollar, and higher aircraft depreciation and lease rentals.

As a result, total group expenditure increased 1.3% on-year to $3.8b. Consequently, third quarter operating profit saw a 5.3% drop to $143m.

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