Singapore Airlines, the world’s second-largest carrier by market value, reported a bigger-than- expected 82% decline in first-quarter profit because of higher fuel costs and waning travel demand.
Net income fell to $44.7 million in the three months ended June from $252.5 million a year earlier, the Singapore-based airline said in a statement today. That compares with the $127 million median of four analyst estimates compiled by Bloomberg News.
Net income fell to $44.7 million in the three months ended June from $252.5 million a year earlier, the Singapore-based airline said in a statement today. That compares with the $127 million median of four analyst estimates compiled by Bloomberg News.
The carrier joined Deutsche Lufthansa AG and Air France-KLM Group in paring passenger-capacity growth plans as economic concerns damp travel demand in the U.S. and Europe. Singapore Air’s main flying unit and its cargo business both posted first- quarter operating losses after a 46% jump in fuel prices.
“Surcharges support yields but they don’t cover the whole cost of fuel,” said K. Ajith, an analyst at UOB Kay Hian Research in Singapore. The company is also losing leisure flyers to budget carriers, he said.
Singapore Air plans to boost capacity 5% this fiscal year, compared with the 6% predicted in May. Air France and Lufthansa both announced reductions in growth plans yesterday after posting earnings below analysts’ estimates.
LOW-COST COMPETITION
Advanced bookings for the next few months are “almost flat” from last year, Singapore Airlines said. The carrier is responding to low-cost competition from AirAsia X and Jetstar by setting up its own long-haul budget unit.
The Singaporean carrier declined 0.4% to $14.71 in Singapore trading today, ahead of the earnings announcement. It has fallen 3.9% this year.
The carrier’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-on 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 S$36 million in the fiscal first quarter, compared with a profit of S$136 million a year earlier. The cargo unit had a S$14 million loss. Regional carrier SilkAir posted a S$21 million profit and the carrier’s engineering arm had a S$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 $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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