Paul Lewis/SINGAPORE
DESPITE RELEASING another strong set of group results for its latest financial year, Singapore Airlines (SIA) admits that its core airline business is coming under intense pressure from increased competition and a strengthening Singapore dollar.
The overall group profit climbed by 12%, to top the S$1 billion ($711 million) mark for the financial year to the end of March, but a large slice of the improvement came from subsidiary operations.
Beneath the headline results, which were generally in line with market expectations, the core airline operation had a 6.7% drop in net profit, to S$876 million. "The group did well, but we are not so proud of the airline's results," says SIA managing director Cheong Choong Kong.
Yields came under pressure, particularly in the second half of the year, from the Singapore dollar's continued appreciation and stronger international competition. Passenger yields fell by 4.3% and cargo yields by 4.9%.
"They've done remarkably well on cost control and in getting loads up, but are facing challenges with yields," says Kleinwort Benson analyst Terence Chan.
While SIA managed to achieve a 2.3% higher passenger-seat factor, cargo loads were off by 2.6%, which the Singapore carrier blames on stronger regional competition, particularly from neighbouring MASKargo, which is the restructured freight subsidiary of Malaysia Airlines.
"Removing any sharp movements in the value of the Singapore dollar, yields will continue to decline because of cargo," predicts Kay Hian James Capel analyst Nora Cheng.
Offsetting SIA's weaker core airline performance was a 153% hike in the operating profit of its subsidiary companies, which jumped by 8%. SIA says that traffic is expected to continue improving over the coming year, but yields will stay under pressure.
Profits increased for SIA Engineering and Singapore Airport Terminal Services and reduced losses incurred by SIA's wholly owned regional carrier, SilkAir.
Source: Flight International
