SIA profits rise despite declining sales
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Singapore Airlines Group has posted a sharp rise in profits for the first quarter of its financial year, despite a drop in revenues.
The company generated an operating profit of SG$111 million (US$81m) for the three months to 30 June 2015, up 185% compared to the SG$39m posted in the same period last year.
But this was largely driven by falling costs, rather than rising sales. The group’s expenditure fell 5.2% to SG$3.45 billion in the quarter, while revenues declined 3.2% to SG$3.57bn. The majority of the cost savings were achieved through lower fuel prices.
But the result could have been even better, were it not for the fact that SIA is locked into hedging contracts to purchase fuel at previous higher prices. Before hedging, SIA’s fuel costs declined SG$468m (-33.3%), but taking the contracts into account, SIA only managed to cut its fuel bill by SG$182m, or 13.3%.
SIA also saved SG$12m from the removal of Tiger Airways from its results, although the company said this was partially offset by losses from Vistara and Virgin Australia.
By unit, national carrier SIA posted an operating profit of SG$108m in the first quarter, up 140% year-on-year, while SilkAir’s profits jumped 150% to SG$5m. The performance of the airline’s engineering unit was flat, while SIA’s cargo losses were halved.
In terms of operations, SIA saw a 4.2% decline in traffic, measured in revenue passenger kilometres (RPK), while average passenger load factor fell 1.4 percentage points to 76.3%. SilkAir‘s traffic increased 8.2%, with load factors rising 0.6 points to 70.1%, while Scoot saw an 11.0% jump in traffic and a 2.9% rise in load factors, to 81.4%.
Finally, Tigerair’s passenger traffic declined 8.5%, largely due to a reduction of capacity. But it did manage to retain relatively high load factors of 83.5%.
Moving forward, SIA said that advance passenger bookings for the July-September quarter are “higher year-on-year”. It added however, that “there is weaker demand for Americas and Europe regions, reflecting the competitive environment”. Yields are also expected to remain under pressure.
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