Singapore Airlines (SIA) says competition from its regional rivals will maintain pressure on yields amid volatile passenger demand after reporting a near doubling of third quarter operating profit thanks to lower fuel prices.
The airline group said on Thursday operating profit rose 95.9 per cent to $S288 million in the three months to December 31 2015, compared with the prior corresponding period.
All of the company’s businesses – SIA comprises Singapore Airlines, regional wing SilkAir, low-cost carrier Scoot and subsidiary Tigerair Singapore, as well as engineering and cargo units – except cargo reported improved profitability in the third quarter.
The result was boosted by net fuel costs dropping $S354 million in the quarter as oil prices across the globe fell sharply at the end of calendar 2015.
Lower fuel helped offset a 3.9 per cent fall in revenue due to “weaker yields from passenger and cargo operations, partially mitigated by higher carriage”, SIA said, with passenger yields falling 4.6 per cent, while cargo yields were down 13.5 per cent.
The challenging operating environment is expected to persist, with travel demand remaining volatile, affected by economic forces and external events,” SIA said in a statement.
“On the competitive front, expansion of other full-service airlines as well as low-cost carriers, particularly in Southeast Asia, will continue to exert pressure on loads and yields. Supported by promotional activities, advance passenger bookings for the January- March quarter are positively tracking seat capacity.”
Singapore Airlines, which flies to Adelaide, Brisbane, Perth, Melbourne and Sydney, with services to Canberra starting in September, posted operating profit of $S387 million for the quarter, compared with $S270 million in the prior corresponding period. The airline is an alliance partner and shareholder of local carrier Virgin Australia.
Regional wing Silkair, which serves Cairns and Darwin, almost doubled operating profit to $S33 million, from $S18 million a year ago.
There was also a quarterly profit for long-haul, low-cost carrier Scoot, which turned around a $S17 million operating loss in 2014 to a $S18 million operating profit in the three months to December 2015.
“Scoot recorded its best quarterly operating result since commencing operations, reaping benefits from its continued expansion and deployment of a more fuel-efficient 787 fleet,” SIA said.
And SIA booked a S$9 million operating profit from its stake in subsidiary Tigerair Singapore. SIA has made a takeover offer for all the shares in Tigarair Singapore that it does not own.
On a negative note, SIA said operating profit from cargo declined to $S2 million, from $S17 million in the prior corresponding period.
“The outlook for air cargo is cautious amid the prevailing industry overcapacity and tepid demand growth. SIA Cargo will continue to manage capacity to better match demand, and pursue higher-yielding product segments,” SIA said.