SIA quarterly profit down 8.6% amid falling cargo revenue
Singapore Airlines’ group operating profit fell by 8.6% to $213 million ($157 million) in its second quarter, as cargo declines impaired revenue growth and costs were inflated by capacity expansion and a higher fuel bill.
Expenditure increased by $180 million or 4.7%, “mainly from capacity injection”, in the three months ended 30 September, notes the group. Revenue, meanwhile, was up $160 million or 3.9%, as a passenger revenue rise of $244 million was offset by a $93 million fall in cargo revenue. Net fuel costs were $20 million higher.
The operating profit generated by Singapore Airlines’ mainline business was down 1.7% at $233 million.
SilkAir’s operating result was unchanged. The regional subsidiary made a loss of $3 million as higher revenue “was matched by an increase in expenditure partly contributed by the 737 Max 8 grounding”.
Low-cost unit Scoot, which has “continued to proactively reduce aircraft utulization” in order to “improve operational resilience,” saw its second-quarter loss widen from S$11 million to S$39 million as it grew capacity 4.7%.
SIA Engineering, by contrast, boosted its operating profit by S$8 million to S$19 million thanks to a combination of rising airframe and line-maintenance revenue, a decline in subcontracting costs, and a favorable exchange variance. These offset lower revenue from engine and component activities.
In its outlook, the group predicts that passenger bookings in the coming months will be stronger year-on-year and that yields will be supported by premium-cabin traffic. “However, headwinds persist,” it warns, citing intensifying competition and an uncertain global economic outlook.
“Cargo demand is likely to remain weaker… amid ongoing trade tensions and a manufacturing slowdown in key export economies,” adds SIA. Across its fiscal first half, cargo revenue was down 12.5% as yields fell by 6.3% and volumes by 6.5%. The group cites “an overall drop in air freight demand amid US-China trade tensions”, as well as “a slowdown in exports from key manufacturing countries in Europe and Asia”.
It adds: “Industry overcapacity on key trade lanes weighed on yields.”
SIA says it expects fuel prices to “remain volatile” in the second half, noting “geopolitical and economic risks”.