SIA blames high fuel prices as half-year profits fall by 69% to $196m

Singapore Airlines also blamed the poor performance on one-off items, including non-cash losses at Virgin Australia which SIA partly owns. ST PHOTO: LIM YAOHUI

SINGAPORE - Singapore Airlines has reported that half-year profits for the six months to end-September fell by 69 per cent to $196 million, mainly due to high fuel prices.

It also blamed the poor performance on one-off items, including non-cash losses at Virgin Australia which SIA partly owns.

At operating level, the SIA group - including regional airline SilkAir and budget airline Scoot - reported profits of $426 million in the first half of the 2018/19 financial year.

This is a 44 per cent drop compared to a year ago.

While year-on-year revenue improved slightly by 2.5 per cent to $7.9 billion, spending grew by a higher 7.6 per cent to hit $7.5 billion.

This was predominantly due to an increase in net fuel cost which jumped by more than 20 per cent, SIA said in its results announcement on Tuesday (Nov 13).

The second quarter from July to September was especially bad for the group, with net profits sinking almost 81 per cent to $56 million, again due mainly to escalating fuel prices.

While the parent premium airline and the group's engineering arm SIA Engineering reported operating profits during the quarter, SilkAir and Scoot went into the red.

SilkAir reported a $5 million improvement, a 2.1 per cent increase in passenger flown revenue on a 6 per cent increase in passenger traffic, but it was not enough to mitigate a $10 million rise in net fuel cost, among other cost increases.

Scoot made an operating loss of $11 million compared to a $2 million profit in the same quarter a year ago.

Bookings in the coming months are expected to be stronger year on year, SIA said.

However, headwinds continue to persist in the form of cost pressures arising from significantly elevated fuel prices compared to a year ago, as well as keen competition in key operating markets.

To manage fuel prices, the group has hedged 58 per cent of its fuel requirements for the second half of the current financial year.

This is to ensure a level of certainty in its total fuel bill.

Amid continuing challenges in the operating environment, SIA stressed that it remains committed to its three-year transformation programme to enhance customer experience, grow revenue and improve operational efficiency.

The recent introduction of new non-stop services to Los Angeles and New York is a significant milestone, providing customers with more convenient travel options, and strengthening the airline's competitiveness as well as the Singapore hub, the airline said.

This will be further enhanced in 2019 with the addition of Singapore-Seattle as the fourth non-stop route between Singapore and the important US market, SIA said.

The airline has declared an interim dividend of 8 cents per share, amounting to $95 million, for the half-year ended Sept 30, 2018.

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