Virgin Atlantic stake sale powers SIA's first-quarter profits

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Singapore Airlines boosted group net profit 56% to S$122 million ($96 million) in the three months to 30 June.

The improvement derives chiefly from an extraordinary gain of S$336 million from the sale of SIA's 49% stake in Virgin Atlantic to Delta Air Lines.

However, this was partially offset by a restructuring impairment charge of S$293 million which arose from the sale of four Boeing 747-400Fs used in the Star Alliance carrier's cargo operation.

Revenue rose 1.7% to S$3.84 billion, aided by a S$75 million settlement over changes in aircraft delivery slots, says SIA. Excluding that settlement, passenger revenue increased marginally as passenger numbers climbed 1.8%, overpowering a yield decline of 2.6%.

Expenditure rose $53 million to $3.75 billion as higher staff and non-fuel costs offset "temporary relief in fuel prices", says the carrier.

Group operating profit was up 10% at S$81.7 million.

Operating profit from SIA's airline operations rose from S$85 million to $89 million, but with traffic growth of 1.6% lagging a 3.5% rise in capacity, load factor fell 1.5 percentage points to 78%.

SilkAir's operating profit meanwhile fell from S$18 million to S$14 million as the regional carrier added a sixth to capacity but grew traffic only 6.2%, with the result that load factor was down 6.8 percentage points at 69.6%.

SIA Engineering's operating profit declined S$6 million to S$28 million, while SIA Cargo narrowed its operating loss from $49 million to $40 million. Cargo traffic fell 5.3% as 4.8% was cut from capacity, causing load factor to kink down 0.3 percentage points to 62.5%.

Over the course of the quarter, SIA took delivery of two Airbus A330-300s and decommissioned one Boeing 777-200, leaving it with a fleet of 102 aircraft at the end of the period.

SilkAir took delivery of one A320, taking its total fleet to 23 aircraft, comprising 17 A320s and six A319s.

Long-haul low-cost unit Scoot also took delivery of one aircraft, bringing its fleet to five 777-200s.

In its outlook, SIA notes that despite challenges of fuel and the poor economic outlook, forward bookings over the next few months are expected to be higher than the same period last year. However, "yields are expected to be weaker as a result of the intense competitive environment", it adds. "In this challenging operating environment, the group will continue to monitor demand trends closely and make appropriate adjustments to flight schedules and capacity, alongside a continued focus on cost discipline."