How SIA soared to $78 million net profit amid crashing demand

The airlines pushed out strong promotions to snap up passengers and kept a vigilant eye on costs to eke out a profit in Q1 2012.

SIA Group posted a net profit of $78 million (+$33 million, or +73%) in the first quarter of the 2012-13 financial year, it announced in a release.

"Group operating profit of $72 million improved $61 million, albeit off a low base as the Group was confronted with higher fuel costs and depressed demand following the Japanese earthquake in the same quarter last year," SIA said.

"Group revenue grew 6% (+$200 million) to $3,777 million, bolstered by a 9.6% improvement in passenger carriage. This traffic growth was driven by promotions undertaken to boost loads, amid intense competition and weak business sentiment. As a result, yields declined 3% from the same period in the previous financial year," it said.

"Expenditure at $3,705 million was up 4%. Although jet fuel prices retreated, fuel cost before hedging was nonetheless 2% higher against last year, mainly attributable to increased fuel uplift due to the 4.3% capacity growth. Staff costs were higher mainly due to increased activities, and wage adjustments following the conclusion of collective agreements with the Unions. Other variable costs also rose in line with the increase in capacity," it added.

For its outlook, SIA Group said the global economy remains bleak and that it can only cope with a continued control on costs and capacity deployment.

"This has negatively impacted business confidence and the outlook for travel demand. Promotional efforts undertaken to boost carriage add downward pressure on yields, especially in Europe and the United States," it said.

"Forward indicators for air freight signal a weak outlook for the cargo business. SIA Cargo faces pressure with respect to both demand and yields. While jet fuel prices have receded in recent weeks, they are still near historical highs. Fuel continues to be the Group’s largest expense item, accounting for about 40% of total expenditure," it added.

"In this difficult environment, the Group will maintain its vigilance in cost control and remain nimble in deploying capacity to meet market demand. The Group is well positioned to weather the challenges with its strong balance sheet," it said further.