Singapore Air Earnings Decline 20% on Expenses for Fuel, 737 Max

(Bloomberg) -- Singapore Airlines Ltd. posted a 20% decline in first-quarter earnings, weighed down by rising fuel costs and expenses from the grounding of six Boeing Co. 737 Max aircraft.

• Net income in the three months to June fell to S$111.1 million ($81.2 million), from S$139.6 million a year ago, Singapore Air said in a statement Wednesday. Sales climbed 6.7% to S$4.1 billion.

Key Insights

• Costs from the grounding of six 737 Max at the carrier’s SilkAir unit in March are accumulating as it’s unclear when the narrow-body planes will return to operation. This has also impacted Singapore Air’s budget unit Scoot, which was expected to get some of the Boeing’s aircraft to expand its services.
• Singapore Air is in a final leg of a three-year transformation plan aimed at cutting costs and improving productivity. Some initiatives have helped, including a revamp of a ticket-pricing system, as the company faces intensifying competition from Middle Eastern rivals and low-cost carriers in the region.
• Fuel costs will remain a major concern as geopolitical tensions could cause oil-price volatility. Singapore Air has been adding more fuel-efficient A350s and 787-10s into its fleet to help mitigate some of that uncertainty.
• Ongoing trade tensions between the U.S. and China continue to undermine cargo demand for airlines such as Singapore Air.

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• Fuel costs climbed 8.6% to S$1.17 billion in the quarter.
• Passenger yields -- a gauge of money earned from flying a customer per kilometer -- remained was little changed at 10.1 Singapore cents.
• Scoot said Monday it will add 16 A321neos to its fleet as part of a plan to make up for lost capacity from the 737 Max grounding. Six planes will replace an existing order for A320neos and 10 will be leased. The first aircraft is expected to be delivered in the last quarter of 2020.
• Click here for the first-quarter financial figures.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Ville Heiskanen

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