Singapore Airlines accomplishes first half profit turnaround to $633mln

The Group sees steady growth as advance bookings for the coming months indicate that demand is holding up.

The Singapore Airlines Group earned a net profit of $633 million for the first half of the 2010-11 financial year, a turnaround from the $466 million loss in the same period a year ago.

Group revenue improved 19% (+$1,143 million) to $7,097 million, on the continued recovery in load factors and yields.

Group expenditure at $6,501 million rose by less than 1% (+$46 million) year-on-year. Expenditure on fuel was higher by $423 million as jet fuel prices increased 27% over the same period last year. This was partially offset by a reduction of $368 million in fuel hedging losses ($118 million this year versus $486 million last year).

Consequently, Group operating profit for the April-September period was $596 million, a turnaround from the $501 million operating loss last year, according to a Singapore Airlines report.

The Parent Airline Company earned an operating profit of $380 million in the first six months of the financial year, against an operating loss of $428 million last year. All the main companies in the Group were profitable, with improved operating performances.

• SIA Cargo Operating profit of $ 102 million (loss of $193 million in 2009)
• SIA Engineering Operating profit of $ 71 million (profit of $47 million in 2009)
• SilkAir Operating profit of $ 36 million (loss of $5 million in 2009) Second Quarter 2010-11

The Group net profit for the July-September quarter was $380 million, in contrast to the $159 million loss in the same period the previous year.

Group revenue at $3,631 million was up 18% (+$549 million) as load factors and yields continued to improve. Group expenditure was almost unchanged (+$22 million) as smaller losses on fuel hedging ($40 million this year versus $200 million last year) offset increase in expenditure in other areas.

As a result, Group operating profit for the second quarter was $345 million, against an operating loss of $182 million in the same three months of last year.

Interim dividend
The Company is declaring an interim dividend of 20 cents per share (tax exempt, one-tier), amounting to $239.3 million, for the half-year ended 30 September 2010 (no interim dividend in the previous year). The interim dividend will be paid on 08 December 2010 to shareholders as at 25 November 2010.

Fleet and route development
Singapore Airlines took delivery of six Airbus A330-300s and one Airbus A380-800 in the first half and decommissioned ten Boeing 777s (six leased out and four sold). As at 30 September 2010, the operating fleet comprised 105 passenger aircraft – seven B747-400s, sixty-five B777s, seventeen A330-300s, eleven A380-800s and five A340-500s – with an average age of 5 years 11 months.

Capacity was added during the period to Hong Kong, New Delhi and Seoul. The all-Business Class service to Los Angeles returned to daily operations in October 2010, while new twice-daily services to Tokyo Haneda were launched on 31 October 2010, complementing existing twice-daily services to Tokyo Narita. During the Northern Winter season, additional services will be added to destinations including Houston (via Moscow), Manchester (via Munich), Sydney and Osaka.

Outlook
Advance bookings for the coming months indicate that demand is holding up. This should support an increase of 5% in passenger capacity in the second half of the financial year. Yields are expected to be steady.

Forward indicators for air freight point to a levelling off for the rest of the financial year.

Forward prices for jet fuel are high and volatile. There is continuing volatility in the currency markets due to challenges faced by the global economy. Given these uncertainties, the positive outlook for the second half of the financial year has to be tempered with some caution.