Don’t be impressed by SIA’s rosy Q1 numbers, analysts warn

It booked a core net loss last quarter.

Singapore Airlines reported surprisingly solid first-quarter results in the first quarter, but CIMB warned that trouble is brewing beneath the group’s rosy numbers.

CIMB noted that SIA’s $91m net profit included $110m in compensation from Airbus for agreeing to give up seven slots out of its 70-strong A350 order. Without this, SIA would have suffered a core net loss of $25m.

“This is SIA’s first quarterly core loss since 2009, and the unpleasant surprise was due to a 1.8% yoy yield decline at SIA mainline after two consecutive quarters of yield improvement, and an acceleration of the cargo yield decline to 7.6%,” said the report.

“Weak trade volumes to Europe and the US likely hit passenger and cargo demand and exacerbated the competition and oversupply. While SilkAir did better than last year, and SIA Cargo and Scoot narrowed their losses, these did not compensate sufficiently for the drop in SIA mainline’s earnings,” the report added.