Singapore Airlines, the world’s second-largest carrier by market value, fell the most in four months on the city’s stock exchange after posting first-quarter earnings that missed analyst estimates.
The stock fell as much as 3.9%, the most on an intraday basis since March 15, and was trading 3% lower at $14.27 as of 9:57 a.m. The carrier yesterday reported an 82% slump in net income to $44.7 million in the three months ended June compared with the $127 million median of four analyst estimates compiled by Bloomberg News.
Singapore Air’s main flying unit and its cargo business both posted operating losses after a 46% jump in fuel prices, helping prompt , Deutsche Bank AG and UOB Kay Hian Research to cut their recommendations on the stock. The carrier also scaled back capacity growth plans amid “flat” bookings and competition from budget rivals.
The stock fell as much as 3.9%, the most on an intraday basis since March 15, and was trading 3% lower at $14.27 as of 9:57 a.m. The carrier yesterday reported an 82% slump in net income to $44.7 million in the three months ended June compared with the $127 million median of four analyst estimates compiled by Bloomberg News.
Singapore Air’s main flying unit and its cargo business both posted operating losses after a 46% jump in fuel prices, helping prompt , Deutsche Bank AG and UOB Kay Hian Research to cut their recommendations on the stock. The carrier also scaled back capacity growth plans amid “flat” bookings and competition from budget rivals.
“A less benign economic environment, higher fuel costs and competition have exacted a toll on its long-haul operations,” K. Ajith, an analyst at UOB Kay Hian Singapore, wrote in a note to clients today. The airline’s planned low-cost long-haul unit could “potentially lead to better profits.” The brokerage cut the stock to “hold” from “buy.”
The Singapore-based airline plans to start the new budget carrier next year. It is yet to announce the name or routes.
The carrier plans to boost passenger capacity 5% this fiscal year, compared with the 6% predicted in May.
TRAVEL DISRUPTED
Singapore Air’s passenger load factor, or the%age of seat filled by paying customers, declined for an 11th straight month in June on a year-on-year basis. The March 11 tsunami in Japan and subsequent nuclear crisis has also disrupted travel demand in Asia.
The main Singapore Airlines unit made an operating loss of $36 million in the fiscal first quarter, compared with a profit of $136 million a year earlier. The cargo unit had a $14 million loss.
“Our anticipated fuel efficiency gain from the introduction of bigger and/or fuel efficiency aircraft didn’t materialize,” Credit Suisse analysts led by Sam Lee said in a report. They cut their rating to “neutral” from “outperform.”
Singapore Air’s regional carrier SilkAir posted a $21 million operating profit for the first quarter and its engineering arm had a $35 million profit.
The company’s fuel costs rose 27% to $1.44 billion, or about 40% of overall expenditure. The carrier had a fuel-hedging gain of S$12 million compared with a $78 million loss a year earlier.
Singapore Air’s namesake unit filled 75.6% of total available seats in the period, down from 78.4% a year earlier. Passenger numbers rose 3.2% to 4.15 million. Yield, the average price a traveler pays to fly one kilometer, was 11.8 cents, compared with 11.7 cents.
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