SIA presents cautious outlook amid strong competition

written by | November 7, 2014
SIA says market conditions are challenging with demand flat amid an uncertain global economic outlook. (Singapore Airlines)
SIA says market conditions are challenging with demand flat amid an uncertain global economic outlook. (Singapore Airlines)

Singapore Airlines (SIA) says challenging market conditions and flat demand amid an uncertain global economic outlook will keep airfares under pressure in the period ahead.

However, the airline group says it is in a good position to meet those challenges, given its strong balance sheet.

SIA reported operating profit of S$183 million in the six months to September 30 2014, down slightly from S$186 million in the prior corresponding period.


Meanwhile the company’s regional carrier Silkair posted operating profit of S$5 million, well below S$22 million a year ago.

“Demand is generally flat, and yields will remain under pressure amid intense competition from other airlines and promotional activities in weaker markets,” SIA said in a regulatory filing to the Singapore stock exchange on Thursday.

“The Group will continue to track market movements closely and make appropriate adjustments to capacity, while practising cost discipline in all business areas.”

On a positive note, SIA Cargo narrowed its loss from S$71 million in 2013/14 to S$34 million amid a moderate recovery in the airfreight market, with demand projected to be stronger in the third quarter as a result of the traditional peak period in the lead-up to Christmas.


“However, overcapacity in the airfreight market is expected to continue to put pressure on yields,” SIA said.

While SIA noted lower fuel prices in recent months had offered a reprieve from cost pressures, the airline expressed concern the slide in the cost of fuel reflected “a slow-down in major economies in the world which could ultimately hurt travel demand”.

The airline group said statutory net profit fell 55 per cent to S$157 million, from S$126 million in the prior year.

The result was dragged down by a S$129 million loss from SIA’s 40 per cent stake in Tiger Airways, while its 20 per cent ownership of Virgin Australia contributed a S$16 million loss.

SIA chief executive Goh Choon Phong told analysts at the airline’s results briefing in Singapore on Friday the company was not considering a full takeover of Tiger, even though it will increase its stake to about 55 per cent following the budget carrier’s upcoming capital raising.

“At this time, a takeover offer is not under consideration,” Goh said, according to the Reuters news agency.

SIA and Silkair operate 116 flights a week to six Australian cities from their Singapore hub. They also have an extensive alliance with Virgin Australia that includes codesharing on each other’s networks and reciprocal frequent flyer benefits.

Singapore Airlines will be featured in the December edition of Australian Aviation, on sale Thursday November 27.

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