SIA posts 1Q earnings of $78m, up 73% from a year ago

SIA said it posted earnings of $78 million in the first quarter of the 2012-13 financial year, an increase of 73% from a year ago.

Group operating profit of $72 million improved $61 million, albeit off a low base as the group was confronted with higher fuel costs and depressed demand following the Japanese earthquake in the same quarter last year.

Group revenue grew 6% or $200 million to $3,777 million, bolstered by a 9.6% improvement in passenger carriage. This traffic growth was driven by promotions undertaken to boost loads, amid intense competition and weak business sentiment. As a result, yields declined 3% from the same period in the previous financial year.

Expenditure at $3,705 million was up 4%. Although jet fuel prices retreated, fuel cost before hedging was nonetheless 2% higher against last year, mainly attributable to increased fuel uplift due to the 4.3% capacity growth. Staff costs were higher mainly due to increased activities, and wage adjustments following the conclusion of collective agreements with the Unions. Other variable costs also rose in line with the increase in capacity.

The operating results of the main companies in the group for the first quarter are as follows:

• Parent airline company: Operating profit of $85 million ($36 million loss in 2011)
• SIA Engineering: Operating profit of $34 million ($35 million profit in 2011)
• SilkAir: Operating profit of $18 million ($21 million profit in 2011)
• SIA Cargo: Operating loss of $49 million ($14 million loss in 2011)

The parent airline company turned around from an operating loss of $36 million in the first quarter of the last financial year to record a profit of $85 million for the three months ended 30 June 2012. Revenue (+7%) rose at a faster pace than expenditure (+3%) on the back of increased passenger carriage (+9.6%), partially offset by lower yields (-3%). Average jet fuel prices for the quarter remained high at above USD130 per barrel despite the recent correction. Other cost items were well contained as a result of continued efforts to maintain strict cost discipline.

On the cargo front, continued weakness in air freight demand exerted downward pressure on cargo loads and eroded yields. As a result, SIA Cargo’s operating loss for the first quarter widened by $35 million.