Singapore Airlines recovers from $36m loss a year ago

Parents' operating profit swung back to $85M in 1QFY13 but other segments remain in red.

According to OCBC Investment Research, while there is little doubt that the promotional fare strategy has worked, one has to also consider that air travel in 1QFY12 was depressed by the Japanese earthquake in Mar 2011.

The parent airline (Singapore Airlines) swung back to an operating profit of S$85m in 1QFY13, from the S$36m loss a year ago. The introduction of promotional fares helped the parent airline to increase passenger carriage by 10% YoY. However, its passenger yields fell 3% and resulted in a smaller increase of 7% YoY in the parent airline’s revenue.

All of SIA’s other business segments nonetheless were less profitable in 1QFY13 than a year ago. 

Here's more from OCBC:

Singapore Airlines’ (SIA) 1QFY13 financial results improved YoY despite the historically slower 1Q.

The group’s revenue grew 6% YoY to S$3.8b while its PATMI jumped 74% to S$78m, albeit off the low base of 1QFY12. SIA’s operating expenses grew 5% YoY, which was slower than its revenue growth and could be partially explained by the retreat in jet fuel prices.

According to Bloomberg, the average S$-adjusted Singapore Jet Kerosene fob Spot Cargo Price (JETKSIFC) illustrated in Exhibit 2 fell 8% QoQ in 1QFY13.

With the lower jet fuel prices, SIA’s fuel cost only rose 4% to S$1.5b despite much higher business activity in the group’s different business segments.

Other business segments:

SilkAir’s operating profit fell 14% YoY to S$18m and SIA Engineering’s operating profit slipped 3% to S$34m. In addition, SIA Cargo’s operating loss widened to S$49m from S$14m in 1QFY12.

While SilkAir and SIA Engineering did relatively okay in 1QFY13, management said soft air freight demand caused cargo yield erosion and the widening of SIA Cargo’s operating losses.

Furthermore, soft air freight demand is expected to persist in the near term.