It blamed steep fuel price hikes.
Singapore Airlines (SIA) took a hit from higher fuel prices as its profits for the first quarter of 2018 dropped by 58.67% to $139.6m from $337.9m last year. Revenue dipped by 0.5% to $3.84b.
Passenger flown revenue grew 5.1% and outpaced the decline in passenger yield (-3.2%) thanks to an 8.3% increase in traffic. Cargo flown revenue was up 6%, as cargo yield rose 9.9%, albeit on lower loads carried (-3.5%). Revenue contribution by engineering services fell by -14.9% on lower airframe and line maintenance activities.
Group expenditure jumped 5.6% $3.65b, predominantly led by an $154m increase in net fuel cost. Fuel cost before hedging rose by $312m, mainly due to a US$26 per barrel (+39.3%) increase in average jet fuel price. Ex-fuel costs were slightly higher by 1.5% partly due to expansion by SilkAir and Scoot.
For the remaining nine months of the financial year, SIA has hedged 46.3% of its fuel requirements in MOPS (21.8%) and Brent (24.5%) at weighted average prices of US$65 and US$54 per barrel respectively.
SilkAir’s profits plummeted by 97.5% to $200,000, whilst total revenue grew by 5% as the 15.3% growth in passenger carriage was partially offset by a 10.3% contraction in yield. Expenditure rose $20m, contributed by higher net fuel cost (+$10m) and ex-fuel costs, partly attributable to 10.0% growth in capacity. Passenger load factor rose 3.4 percentage points to 75.0%.
Scoot’s operating profit was 100% down to $1m. Passenger traffic growth of 17.1%, partially offset by a 1.8% reduction in yield. Expenditure increased by 16.7% no thanks to higher net fuel costs and an expanded operation. Passenger load factor was 2.1 percentage points higher at 86.1%.
Meanwhile, operating profit for SIA Engineering fell by 47.37% to $10m, mainly due a reduction in revenue on lower airframe and fleet management activities. The deterioration was partially cushioned by foreign exchange gains against losses last year, and lower subcontract services costs, SIA added.
“Passenger traffic is expected to grow in the coming months, although competition in key operating markets persists,” the company said. “Costs remain under pressure, especially from higher fuel prices. Cargo demand in the near term is steady despite concerns over global trade tensions, the escalation of which could potentially have a longer-term impact on air cargo demand.”
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