Singapore Airlines Ltd. reported first-quarter profit almost tripled as lower oil prices reduced costs and the company benefited from the sale of a stake by its subsidiary.
Net income rose to SGD256.6 million (USD190 million) in the three months ended in June from SGD91.2 million a year earlier, the carrier said in a Singapore stock exchange statement yesterday. Sales dropped 2 percent to SGD3.6 billion.
Non-operating income jumped to SGD148.1 million after SIA Engineering Co. profited from the sale of its stake in Hong Kong Aero Engine Services Ltd., coupled with SGD36 million in special dividends from the Hong Kong company, according to the statement.
Singapore Air benefited from an increase in passenger numbers in the quarter as economic growth from China to Southeast Asia to India allowed more people to travel for work and leisure. Chief Executive Officer Goh Choon Phong has ordered $10 billion of new aircraft to take on competition as AirAsia Bhd., Emirates and Etihad Airways chip away market shares of Singapore Air and low-cost units Tiger and Scoot.
The parent airline’s yields, or revenue earned from a passenger for flying a kilometer, fell to 10.3 Singapore cents in the first quarter, from 10.7 cents a year earlier.
The carrier posted its lowest passenger yield in six years in the 12 months through March, with CEO Goh saying pressure is being felt across the industry. Cathay CEO Ivan Chu said this month that there is “ intense pressure on yield.”
Singapore Air carried 4.63 million passengers at its main airline in the fiscal first quarter, 1.3 percent more than the 4.57 million a year earlier. It filled 75.8 percent of seats, compared with 76.3 percent a year earlier.
A more than 50 percent decline in oil prices in the past two years has helped reduce costs for most airlines, whose single biggest expense is fuel.
Brent traded at an average of $46.91 a barrel in the three months through June, 26 percent lower than the $63.37 a year earlier. It traded at $43.24 a barrel as of 7:15 p.m. in Singapore yesterday.
Singapore Air – the only Asian carrier to fly the Concorde and the first in the world to fly the A380 superjumbo – needs new passengers to stem a slide in earnings. The carrier is counting on cabin comforts to lure higher-end passengers used to its fully flat beds as well as more price-conscious customers.
The carrier has been looking to build alliances abroad as part of a multi-hub strategy. It partnered with India’s Tata Group to start Vistara in January 2015 and owns about 23 percent of Virgin Australia Holdings Ltd. The company’s Scoot unit also teamed up with Nok Airlines Pcl of Thailand to set up NokScoot.
Singapore Air started flying its Airbus Group SE 253-seat A350 aircraft to Amsterdam from May 9. The carrier will receive the ultra-long-range version of the plane in 2018 for services to New York, which will become the world’s longest non-stop flight. Kyunghee Park, Bloomberg
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