SIA's Q2 profits soar, but bumps expected ahead

Singapore Airlines posted Q2 earnings of $189.9 million, as both passenger and cargo traffic increased. Across the group, the results were mixed as the parent airline and SIA Cargo saw stronger profits, while Scoot's and SilkAir's earnings fell.
Singapore Airlines posted Q2 earnings of $189.9 million, as both passenger and cargo traffic increased. Across the group, the results were mixed as the parent airline and SIA Cargo saw stronger profits, while Scoot's and SilkAir's earnings fell.ST FILE PHOTO

Airline faces rising competition from both full-service carriers and budget airlines; fuel prices remain volatile

Singapore Airlines (SIA) turned in a better second quarter despite a tough environment, buoyed by robust operating results.

Earnings shot up to $189.9 million, up from $64.9 million a year earlier as both passenger and cargo traffic increased.

However, the airline group, which is fighting competition from both full-service carriers and budget airlines, warned that yields continue to remain under pressure, despite some stabilisation in recent months.

Revenue rose 5.3 per cent in the three months to Sept 30 to $3.85 billion. Earnings per share was 16.1 cents, up from 5.5 cents a year ago, while net asset value per share was $11.39, up from $11.07 as at March 31.

Operating profit more than doubled from $109.1 million to $232.6 million, underpinned by revenue growth which outstripped the increase in expenditure.

Expenditure climbed 2 per cent to $3.62 billion, partly due to higher staff costs and handling charges, offset by a 1.7 per cent dip in fuel costs.

Across the group, the results were mixed as the parent airline and SIA Cargo posted stronger profits, while Scoot's and SilkAir's earnings fell as they continued to invest in spreading their wings.

The airline's results outperformed UOB Kay Hian's projection, which had estimated a second-quarter net profit of $142 million owing to a higher load factor. Net profit surged about 32 per cent for the six months to $425 million on the back of higher operating profit and lower share of losses from associated firms.

SIA Cargo swung into the black with an operating profit of $26 million, compared with an operating loss of $11 million a year earlier. SIA Engineering's operating profit fell from $25 million to $20 million.

The airline's results outperformed UOB Kay Hian's projection, which had estimated a second-quarter net profit of $142 million owing to a higher load factor.

  • AT A GLANCE

  • REVENUE: $3.85 billion (+5.3%)

    NET PROFIT: $189.9 million (+192.6%)

    INTERIM DIVIDEND: 10 cents a share (+11.1%)

Net profit surged about 32 per cent for the six months to $425 million on the back of higher operating profit and lower share of losses from associated firms. Revenue rose 5.5 per cent to $7.71 billion.

SIA has declared an interim dividend of 10 cents per share, up from nine cents in the same period last year.

The airline group said fuel prices will remain volatile as the outlook for oil demand brightens against ongoing supply constraints.

Amid pressure from carriers such as the Gulf trio and Chinese airlines, SIA embarked on a three-year transformation programme earlier this year, which it says is progressing on track. "The group is identifying new opportunities for revenue generation, restructuring of its cost base and enhancement of organisational effectiveness," it said.

In the coming quarters, competition from budget carrier Norwegian Air and Qantas could have a negative impact on passenger yields, UOB Kay Hian analyst K. Ajith noted. "Cargo earnings are expected to reverse into the black, following improved loads, and are likely to be sustained into 2018."

SIA shares closed down seven cents at $10.32.

A version of this article appeared in the print edition of The Straits Times on November 08, 2017, with the headline 'SIA's Q2 profits soar, but bumps expected ahead'. Print Edition | Subscribe