Singapore Air says Q1 net profit down 82% y/y

Singapore Airlines (SIA) (SIAL.SI), the world’s second-largest airline by market value, reported an 82% fall in first-quarter net profit, worse than analyst forecasts, as soaring jet fuel prices hit its margins.

The carrier, about 55%-owned by Singapore state investor Temasek Holdings (TEM.UL), posted a net profit of $44.7 million in the quarter ended June 30, compared to $252.5 million a year ago. Four analysts polled by Reuters had on average forecast the figure at $165.6 million.

 

“The prevailing price of jet fuel of above US$130 ($156) per barrel is close to 50% higher year-on-year. At these levels, fuel cost now constitutes more than 40% of the group’s total expenditure,” SIA said in a statement.

 

“Advance bookings for travel in the next few months are almost flat compared to the same period last year. With the current economic uncertainties, significant challenges remain in the key markets of Europe and the United States.”

 

The world’s airlines recovered last year from their worst ever downturn following the global economic crisis, but are now being hit by high jet fuel prices that are eroding margins.

 

The International Air Transport Association (IATA) has cut its industry profit forecast for 2011 by more than half to US$4 billion ($4.8 billion) as high oil prices and turmoil in Japan, North Africa and the Middle East weigh on the industry’s recovery.

 

The IATA US$4 billion profit forecast compares with an US$8.6 billion forecast on March 2, just before the Japan earthquake and tsunami triggered a crisis at a nuclear power station. Since then, the Arab uprisings have spread and oil has remained above US$100 a barrel.

 

SIA shares have declined by nearly 4% since the start of the year while the overall Singapore market has been largely flat.