Mayday, mayday: SIA's long-haul operations struggle for profitability

Dark skies ahead for SIA as its cargo business also posted an operating loss of SGD49m.

According to Maybank Kim Eng, Singapore Airlines (SIA) posted a 1QFY3/13 NPATMI of SGD78m (+SGD33m, +73% YoY), which was helped by the addition of incidentals, as core SIA parent operations were still mired in loss-making territory.

Here's more from Maybank Kim Eng:

Although SIA remains a strong contender to benefit from an airline sector-wide recovery, we continue to see no clear signs of that as yet. We maintain our HOLD call, pegged to 1.0x FY3/13 P/BV, in line with our neutral view of the regional airline sector.

Long-haul profitable only after adding incidentals. SIA’s long-haul operations were still struggling for profitability as load factors of 79.5% were more than a full percentage point below its breakeven load factor of 80.7%. Yields were negatively affected by promotions to improve loads. Helped by indirect revenue such as leasing of aircraft and in-flight sales, SIA’s long-haul segment eked out an SGD85mil operating profit for the quarter.

SilkAir shows promise, Cargo still a drag. The company’s push forward with regional arm SilkAir was evident, with a 25% YoY increase in capacity this quarter. This effort seemed to pay off with SilkAir being the only business segment posting load factors (76.4%) above break-even (75.0%). SIA Cargo had yet another poor quarter, posting an operating loss of SGD49m, worse by SGD35m YoY. The company guided that forward freight indicators remain weak.