iscover
Singapore Airlines is moving into unfamiliar territory as it struggles to maintain profitability amid rising costs and intensifying competition.
The sale of assets including aircraft and engines has helped carry Singapore Airlines group to a 12.8 per cent increase in full-year net profit to S$379 million, partially offsetting a near-20 per cent reduction in operating profit to S$229 million. The result also accounted for S$20 million in fines to Australian and New Zealand competition authorities over airfreight pricing.
In announcing its annual performance, SIA said its operating results were continuing to be affected by “persistently high fuel prices and lower yields due to weak global economic conditions”.
“Amid these challenges, Group revenue was higher by $240 million (+1.6 per cent) as passenger revenue grew on the back of 7.3 per cent passenger carriage growth, albeit at lower yields. Promotional activities necessitated by intense competition as well as depreciation of revenue-generating currencies against the Singapore dollar drove passenger yields lower by 4.2 per cent. Cargo revenue continued to suffer from a contraction in both loads (-6.0 per cent) and yields (-4.3 per cent).”
Profit at the parent company, SIA Engineering and Silk Air were all down on the previous year. SIA Cargo posted a widened operating loss for the year as the region’s airfreight traffic continues to suffer against Middle East competition and regional malaise in the sector.
During the January-March 2013 quarter, Singapore Airlines took delivery of one A330-300 and decommissioned one 777-200, maintaining an operating fleet at 101 aircraft. As at March 31 the fleet comprised 57 777s, 20 A330-300s, 19 A380-800s and five A340-500s, with an average age of 6 years and 8 months. SIA Cargo operated 12 747-400 freighters, after parking one aircraft in December 2012.
This financial year, SIA expects to take delivery of six A330-300s and three 777-300ERs, and decommission six 777-200s and five A340-500s. In addition, two 777-200ERs will return to the fleet upon expiry of their leases to Royal Brunei Airlines. By March 2014, the airlines plans to retain a fleet of 101 aircraft.
On its planned equity sale in Virgin Atlantic to Delta Airlines for US$360 million, Singapore Airlines said: “Completion of the proposed sale is subject to regulatory approvals being obtained in Europe and the United States, and is expected to close in the fourth quarter of the 2013 calendar year.
Looking to the current financial year, SIA said it remained cautious amid continued global economic challenges, notably in Europe and the US.
“Forward passenger bookings for the next few months are almost flat compared to the same period last year. Yields are likely to remain under pressure amid weak economic sentiment and revenues will be further diluted if key revenue-generating currencies continue to depreciate against the Singapore dollar. Furthermore, fuel prices remain persistently high.”
