Bright future ahead for SilkAir and Scoot as they pick up SIA’s mainline slack

Both delivered stellar load factor increases.

When its mainline carrier earnings dropped more than expected, Singapore’s flag carrier still managed to breathe a sigh of relief as its secondary airlines performed stellarly, as if on cue.

According to a report by CIMB, SIA’s mainline carrier earnings fell by 43% in 1H16, excluding compensation for delivery delays.

“Its unit cost reduction was minimal despite jet fuel prices (inclusive of hedging losses) falling 27% yoy to US$90/bbl in 2Q16, as it saw higher maintenance and leasing costs, while the US$ appreciated 11% against the S$,” CIMB said.

However, SilkAir and Scoot performed very well in contrast, delivering load factor increases, stable yields, and noticeably lower unit costs as a result of its fleet modernisation programmes.

“Hence, SilkAir saw significantly higher profits, while Scoot neared breakeven. SIA’s investment in, and expansion of, these two carriers is yielding fruit as they have a bright future,” CIMB said.

SIA Cargo also managed to surprise, as it narrowed its losses despite poor market conditions.

“Cargo yields dropped almost double-digit, as lower fuel costs were entirely passed through. Poor air freight demand also caused SIA Cargo to suffer a fall in loads,” CIMB said.