Singapore Airlines will remain “nimble and flexible” in the face of a weak operating outlook and aggressive pricing by competitors.
The carrier said last week that its net income slid 70% to SGD 64.9 million (AUD 61.1 million) in the three months ending September 2016 compared to the corresponding period a year earlier.
In a statement released last Thursday, Singapore Airlines said the passenger airline business continued to be “impacted by geopolitical uncertainty and weak global economic conditions.
“The outlook in most major economies remains tepid. Furthermore, excess capacity and aggressive pricing continue to persist in the market, exerting pressure on loads and yields.
“Fuel prices remain volatile given the uncertainty over how the proposed cut in OPEC oil production would be implemented. For the second half of the financial year, the Group has hedged 29.3% of its jet fuel requirement in Singapore Jet Kerosene (MOPS) and 3.0% in Brent at weighted average prices of USD68 and USD63 per barrel, respectively.
“The Group will remain nimble and flexible, leveraging its portfolio of airlines to cater to demand in different travel markets, while maintaining cost vigilance. The improved operating capability and efficiency of the growing Airbus A350 fleet is enabling the launch of previously unserved new routes, while the deep integration between Scoot and Tiger Airways continues to provide cost efficiencies and opportunities to enhance network connectivity.
“Both the full-service and low-cost airline segments are boosting the Group’s competitiveness and are offering new opportunities for expansion.”
The Singapore Airlines group posted a first-half operating profit of SGD 302 million (AUD 284.4 million), improving SGD 62 million (+25.8%) year-on-year.
SIA said: “Group revenue declined SGD 273 million from one year ago to SGD 7,305 million (-3.6%). Passenger flown revenue from the Parent Airline Company fell SGD 320 million (-6.4%), as downward pressure on yields persisted. This was partly compensated by higher flown revenue from Scoot (+SGD 88 million), supported by its rapid growth.
“Cargo and mail revenue dropped SGD 99 million (-9.6%), notwithstanding higher freight carriage, as cargo yield was further eroded. The decline in passenger flown revenue and cargo revenue was partly mitigated by growth in other revenue, largely arising from up-front recognition of revenue from unutilised tickets, partially offset by the absence of income earned upon the release of seven aircraft delivery slots reported last year.
“Group expenditure contracted by SGD 335 million to SGD 7003 million (-4.6%).
Net fuel costs declined SGD 622 million (-25.2%), arising from a 21% drop in average jet fuel price (-SGD 411 million), lower hedging loss (-SGD 282 million) and weaker US Dollar against the Singapore Dollar (-SGD 4 million), partly offset by higher uplift (+SGD 75 million).
“Ex-fuel costs were up SGD 287 million or 5.9% from one year ago, partly attributable to capacity expansion by SilkAir and Scoot.”
Edited by William Sykes