Third Quarter Revenue Growth Offsets Higher Net Fuel Costs

GROUP FINANCIAL PERFORMANCE

Third Quarter 2018/19

The SIA Group reported an operating profit of $388 million in the third quarter of the 2018/19 financial year, a decline of $66 million (-14.5%) from last year’s restated profit of $454 million [Note 2], notwithstanding a steep $227 million (+22.2%) increase in net fuel costs. A robust improvement in revenue (+$265 million or 6.5%) largely offset higher fuel and non-fuel expenditure.

Group revenue increased $265 million to $4,342 million on stronger flown revenue (+$248 million), largely driven by growth in passenger demand (+$245 million or 7.7%). Passenger traffic for the Group rose 8.0%, which outpaced the growth in capacity, resulting in a 0.9 percentage-point improvement in passenger load factor to 83.0%. Group RASK (measured in revenue per available seat-kilometres) increased 1.3% as transformation programme momentum continued. Cargo flown revenue was steady against last year (+$3 million or 0.5%), as stronger yields (+3.4%) offset the lower loads carried (-2.8%). Revenue contribution by engineering services rose $16 million (+14.2%), led by higher airframe maintenance activities.

Expenditure for the Group rose $331 million to $3,954 million (+9.1%), mainly due to higher net fuel cost (+$227 million or 22.2%). Fuel cost before hedging for the Group rose by $285 million, predominantly due to a US$16 per barrel (+21.1%) increase in average jet fuel price, partially alleviated by a larger hedging gain versus last year (+$58 million or 131.6%).

Group net profit declined $105 million (-27.0%) to $284 million, as the weaker operating profit was exacerbated by share of losses of the Group’s joint ventures (-$28 million), in particular NokScoot, which saw its results being adversely impacted by the rise in fuel prices and intense competition.

 Third Quarter Operating Results of Main Companies

The operating results of the main companies in the Group for the third quarter of the financial year were as follows. Higher fuel cost remains a challenge for the Group airlines.

Operating profit for the Parent Airline Company rose $3 million to $369 million, a result of growth in revenue (+$217 million or 6.6%) outpacing the rise in expenditure (+$214 million or 7.3%). Passenger flown revenue improved $195 million (+7.7%), in line with a 7.3% gain in carriage (measured in revenue passenger-kilometres). With capacity expansion of 5.0% (measured in available seat-kilometres), passenger load factor increased to 83.4% (+1.8 percentage points), which is the highest passenger load factor ever achieved in the third quarter. Despite currency headwinds and unprecedented capacity growth in recent quarters, RASK increased 2.4%, marking the fifth consecutive quarterly improvement.  Cargo flown revenue was stable year-on-year (+$3 million), as stronger yields (+3.4%) were partially offset by lower loads carried (-2.8%).

The rise in expenditure was led by higher net fuel cost (+$183 million or 21.6%), primarily due to higher fuel prices (+$196 million) and volume consumed (+$16 million) from the expansion in operations, partially mitigated by higher fuel hedging gains (+$45 million). Ex-fuel costs rose $31 million, as costs from the higher traffic and flight activities, including staff costs, were partly mitigated by lower other costs from the return of several leased aircraft.

SilkAir reported a $12 million contraction in operating profit to $7 million.  Passenger flown revenue rose $5 million (+1.8%) on 3.8% growth in passenger carriage, with RASK improving by 1.2%. However, expenditure was up $13 million, mostly on higher net fuel cost (+$11 million). Passenger load factor rose 2.3 percentage points to 77.1% as higher traffic exceeded capacity growth (+0.7%).

Scoot recorded an operating profit of $1 million, a $42 million deterioration from last year’s operating profit of $43 million. Passenger flown revenue increased $40 million (+10.1%), supported by passenger traffic growth of 12.1%. However, a higher net fuel bill (+$34 million) and costs of expansion (capacity growth was 17.0%) led to an $89 million increase (+24.0%) in expenditure. Passenger load factor fell 3.6 percentage points to 83.4%, partly contributing to a 5.8% reduction in RASK.

Operating profit for SIA Engineering narrowed to $16 million, $3 million lower from a year ago. The decline was mainly due to a contraction in revenue on lower airframe and fleet management activities, which was partly mitigated by a corresponding reduction in material costs incurred.

April to December 2018

The Group’s operating profit for the nine months to December 2018 declined $402 million to $814 million (-33.1%). Excluding the fuel price increase of 32.6% and prior year’s non-recurring revenue items of $175 million, operating profit for the Group would have been $1,307 million, $267 million higher year-on-year.

Revenue grew $634 million (+5.5%), after adjusting for last year’s non-recurring revenue items. Expenditure for the nine months increased $861 million (+8.1%) on higher fuel costs and capacity growth. Ex-fuel costs were $254 million higher (+3.3%), well within the Group’s capacity growth of 5.9%.