Singapore Airlines earnings rebound with $253mln profit

Carrier reports resurgence in freight may be sustained but the rate of growth may slow down.

The Group earned a net profit of $253 million in April – June 2010. This was a turnaround of $560 million from the loss of $307 million recorded in the same quarter a year ago.

Group revenue at $3,466 million grew 20.7% (+$594 million), reflecting the recovery in load factors and yields.

Group expenditure also increased year-on-year but at a slower rate of 0.8% (+$24 million). This was due mainly to higher expenditure on fuel (+$313 million or +42.4%), partially offset by smaller loss from fuel hedging ($78 million this year versus $287 million last year), as well as other non-fuel expenditure savings of $80 million.

Group operating profit for the quarter was $251 million, a turnaround of $570 million from the $319 million operating loss last year, according to a Singapore Airlines report.

The Parent Airline Company earned an operating profit of $136 million in the first quarter of the 2010-11 financial year, in contrast to the operating loss of $271 million last year. All the main companies in the Group were profitable during the period and performed better year-on-year.

• SIA Cargo Operating profit of $ 60 million (loss of $104 million in 2009)
• SIA Engineering Operating profit of $ 36 million (profit of $12 million in 2009)
• SilkAir Operating profit of $ 15 million (loss of $3 million in 2009)

The Parent Airline Company carried 4.0 million passengers during the quarter, a year-on-year increase of 5.5%. Capacity (in available seat-kilometres) was practically unchanged from last year while passenger carriage (in revenue passenger-kilometres) was 8.8% higher. Consequently, passenger load factor improved 6.8 percentage points to 78.4%.

Passenger breakeven load factor at 76.9% was lower by 7.4 percentage points year-on-year, as passenger yield recovered by 14.7%.

SIA Cargo’s freight traffic (in load tonne-kilometres) for the first quarter was up 12.1% year-on-year, against capacity growth (in capacity tonne-kilometres) of 4.5%. As a result, cargo load factor rose 4.4 percentage points to 65.0%.

Cargo yield improved 42.3% compared to the same period in the preceding year. With unit cost increasing at a slower pace (+10.9%), cargo breakeven load factor fell 17.1 percentage points to 60.5%.

Meanwhile, in the April – June 2010 quarter, the Company took delivery of four A330-300s and decommissioned six B777s (four for lease and two for sale). As at 30 June 2010, the operating fleet comprised 106 passenger aircraft – seven B747-400s, sixty-nine B777s, fifteen A330-300s, ten A380-800s and five A340-500s – with an average age of 6 years and 1 month.

During the quarter, capacity was added to destinations, including Hong Kong, New Delhi and Seoul, where demand was strong. From 01 September 2010, the five-times-weekly Singapore-Munich-Manchester service will be expanded to a daily frequency.

Outlook
Advance bookings indicate that the year-on-year recovery in passenger carriage and yields evident in the quarter to June will hold up for the rest of 2010.

Similarly, leading indicators, as well as sentiment among shippers and forwarders, suggest that the recent resurgence in air freight may be sustained in the near term, although the rate of growth may abate.

On the cost side, jet fuel prices have seen trading around the level of USD85 per barrel. Uncertainties about demand and supply are reflected in forward prices which are markedly higher than spot prices, and consequently affect the cost of hedging.