SIA posts sharp profit drop

SIA flies into unfamiliar skies as it struggles for profit. (Rob Finlayson) — SIA has reported a sharp profit drop. (Rob Finlayson)

In a sign how the disappearance of MH370 and political turmoil in Thailand has hit airlines in the region, Singapore Airlines has reported a sharp drop in first quarter profit amid “unforeseen events” and intense competition.

SIA posted net profit of $S34.8 million ($A30 million) for the three months to June 30 2014, down 71 per cent from $S121.8 million in the prior corresponding period, a result that was dragged down by the losses accumulated at Tigerair, which is 40 per cent owned by SIA, as well as weakness at both Singapore Airlines and Silkair.

Revenue fell 4.1 per cent to $S3.7 billion in the quarter “on the back of weaker yields amid intense competition, and unforeseen events that depressed travel demand in some key Asian markets”, SIA said in a statement on Wednesday.

A recent report from CAPA – Centre for Aviation found Chinese tourists were increasingly avoiding the Southeast Asian markets of Malaysia, Thailand and Singapore following the disappearance of MH370 and the ongoing political dramas in Thailand.

Malaysia experienced a 20 per cent drop in Chinese visitors in April 2014, compared with the same month a year ago, while Singapore suffered a decline of 39 per cent, and the report said. Moreover, Chinese tourists to Thailand fell 20 per cent over the first five months of 2014.

SIA said operating profit for Singapore Airlines fell 49 per cent to $S45 million, while Silkair managed to eke out a slender $S2 million operating profit, down from $14 million in the prior corresponding period. On a slightly positive note, operating losses at SIA’s cargo division narrowed to $S18 million, from $S40 million a year ago.

The company presented a bleak outlook statement, saying things were likely to remain difficult in the period ahead.

“The outlook for for the air transportation industry has become more challenging with continuing uncertain global economic climate, geo-political concerns in the region and elevated fuel prices,” SIA said.

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“Aggressive fares and capacity injections from competitors will continue to place pressure on yields.”

In this difficult environment, SIA said it would continue to monitor demand trends closely and make appropriate adjustments to capacity deployment alongside a focus on cost discipline.