Singapore Airlines Profit Tumbles 81% as Fuel Costs Sting

(Bloomberg) -- Singapore Airlines Ltd. reported an 81 percent plunge in second-quarter profit as higher fuel costs weighed on earnings.

  • Net income for the three months through September fell to S$56.4 million ($41 million) from S$293.3 million a year earlier. Sales rose 5.6 percent to S$4.06 billion.

Key Insights

  • The premium Asian carrier joins others such as Deutsche Lufthansa AG and Air China Ltd. that have been stung by oil. That’s why the International Air Transport Association cut its outlook for airline profitability for the current year by 12 percent from an earlier estimate.
  • The surge in fuel costs, the biggest expense for Asian operators, will pose a challenge for Singapore Air, which is in the midst of a transformation program. It is seeking to cap costs and better position itself against Middle Eastern and low-cost Asian carriers.
  • Passenger yields -- a gauge of money earned carrying a passenger for one kilometer -- slipped 1 percent in the second quarterly decline. That shows the carrier is still facing a lot of competition in both its premium and economy offerings.
  • There was good news on the cargo front, with yields climbing 9.9 percent as shippers rushed to beat tariff increases sparked by the trade dispute between the world’s two biggest economies. Things look more uncertain for 2019 with global economic growth projected to slow.

Market Context

  • Singapore Airlines shares have fallen 12 percent this year, compared with a 10 percent decline in the Straits Times Index.

Get More

  • The airline will pay shareholders an interim dividend of 8 Singapore cents per share.
  • Fuel costs climbed 24 percent to S$1.16 billion in the quarter as average Brent prices soared 46 percent from a year earlier.
  • A fuel-hedging gain of S$151.7 million helped defray some of those expenses. A year earlier, Singapore Airlines recorded a hedging loss of S$3.3 million.
  • Losses from associate companies amounted to S$117.1 million in the quarter, largely due to accounting adjustments made for its Virgin Australia shares.
  • Singapore Airlines is expected to tap the debt market after raising S$600 million last month to pay for new aircraft. The carrier expects to take delivery of more Airbus SE A350s and Boeing Co. 787-10s, and also has 777-9 planes on order.

©2018 Bloomberg L.P.