SIA full-year profit soars 12.8% but operating performance sputtering

Blame it on high fuel prices.

Singapore Airlines (SIA) announced that its Group net profit improved 12.8% year-on-year to $379 million, despite recording a lower operating profit for FY 2012-2012. This was due to an increase in non-operating items from surplus on the sale of aircraft, spares and spare engines, and higher net interest income, partially offset by a $20 million provision by SIA Cargo related to competition law matters in Australia and New Zealand/

Operating profit fell 19.8% (-$57 million) over the preceding financial year to $229 million, with the Group continuing to be affected by persistently high fuel prices and lower yields due to weak global economic conditions, the company said in a release accompanying its full-year results.

Amid these challenges, Group revenue was higher by $240 million (+1.6%) as passenger revenue grew on the back of 7.3% passenger carriage growth, albeit at lower yields. Promotional activities necessitated by intense competition as well as depreciation of revenue-generating currencies against the Singapore dollar drove passenger yields lower by 4.2%. Cargo revenue continued to suffer from a contraction in both loads (-6.0%) and yields (-4.3%).

Group expenditure was up by $297 million (+2.0%), primarily from increases in fuel, staff and variable costs. Fuel accounted for 40% of expenditure during the financial year.

The operating results of the main companies in the Group for the financial year are as follows: Parent Airline Company Operating profit of $187 million ($181 million profit in 2011-12); SIA Engineering Operating profit of $128 million ($130 million profit in 2011-12); SilkAir Operating profit of $97 million ($105 million profit in 2011-12); and SIA Cargo Operating loss of $167 million ($119 million loss in 2011-12).

For the fourth quarter of FY 2012-2013, Group operating loss widened by $39 million in the fourth quarter as revenue fell by 1.0% (-$38 million), largely owing to weaker passenger and cargo yields. In particular, both the Parent Airline Company and SIA Cargo suffered operating losses for the quarter.

The Group, however, achieved a net profit of $68 million for the quarter, against a loss of $38 million in the previous year. This is mainly attributable to the surplus on the sale of aircraft, spares and spare engines.

The Board of Directors recommends a final dividend of 17.0 cents per share (tax exempt, one-tier) to be paid on 16 August 2013 to shareholders as at 1 August 2013. Including the interim dividend of 6.0 cents per share paid in November 2012, the total dividend per share is 23.0 cents (FY2011-12: 20.0 cents per share).

The Parent Airline Company expanded its capacity (in available seatkilometres) by 4.3% during the financial year while passenger carriage (in revenue passenger kilometres) grew by a higher 6.8%. Passenger load factor improved by 1.9 percentage points to 79.3%.

SilkAir’s passenger carriage grew 16.9% but it was unable to match the capacity expansion of 20.2%. Accordingly, passenger load factor slid 2.1 percentage points to 73.6%. SIA Cargo reduced its cargo capacity (in capacity tonne-kilometres) by 5.5%. As carriage (in load tonne-kilometres) declined by a higher 6.0%, cargo load factor dropped by 0.4 percentage point to 63.4%.

The Group said it continuously reviews its network to better match capacity to demand. In view of the post-Easter lull period, the Parent Airline Company and SilkAir will be implementing capacity adjustments to weaker markets between April and June 2013.