SIA's Q2 profit surges 78% to $160.6m

[SINGAPORE] Singapore Airlines' (SIA) net profit for the second quarter ended Sept 30, 2013 soared 78 per cent year-on-year to $160.6 million, boosted by higher operating profit and share of profits from associated companies as well as gains from the sale of aircraft.

Revenue for the quarter rose 2.8 per cent to $3.9 billion, aided by a 5 per cent growth in passenger carriage, though this was partially offset by declining yields. Yields dropped 3.5 per cent from a year earlier, hit by the continued strength of the Singapore dollar against key revenue-generating currencies and promotional activities in the face of stiff competition.

Earnings per share came in at 13.6 cents, up from 7.7 cents a year ago.

For the half year, net profit climbed to $282.4 million from $168.1 million, while revenue rose to $7.74 billion from $7.57 billion.

The group has announced an interim dividend of 10 cents per share, payable on Dec 3, higher than last year's interim dividend of six cents per share.

Cash and cash equivalents as at end-Sept worked out to $5.04 billion.

In an update on its joint venture with India's Tata Sons to set up a full-service carrier in the populous nation, SIA said it will now start seeking other regulatory approvals - such as a no-objection certificate from India's Ministry of Civil Aviation and a scheduled air operator's permit from the Directorate General of Civil Aviation - having received the green light from the Foreign Investment Promotion Board (FIPB) on Oct 24.

Operating profit rose to $86.9 million from $70.4 million, while surplus on disposal of aircraft, spares and spare engines worked out to $9.1 million versus a loss of $4.2 million previously. Share of profits of associated companies surged to $36.6 million, up from $12 million.

During the second quarter, the parent airline company turned in an operating profit of $97 million, climbing from $84 million, as revenue growth surpassed expenditure growth.

Passenger carriage (in revenue passenger kilometres) rose 4.9 per cent, outpacing the 3.2 per cent growth in capacity, which helped load factor to gain 1.3 percentage points to 81.1 per cent.

SIA Engineering reported an operating profit of $28 million, down from $32 million a year ago.

SilkAir's operating profit shrank to $8 million from $19 million a year earlier, as capacity growth to develop new regional markets outpaced that of passenger carriage.

SIA Cargo's operating loss narrowed to $31 million from a loss of $50 million the previous year, as it continues to scale back capacity to match demand.

Uncertainties in the global economy, coupled with excess capacity, depressed yields, which slipped 1.8 per cent.

SIA Cargo's carriage fell 7.2 per cent while capacity came down by 5.6 per cent, resulting in cargo load factor dipping one percentage point to 61.5 per cent.

"Cargo demand is expected to remain flat due to weak international trade volumes and excess capacity in the market," the group said, adding that yields will continue to remain under pressure.

During the quarter, the parent airline company took delivery of two Airbus A330-300 aircraft and two Boeing 777-300ERs, while selling off one B777-200 and decommissioning one B777-200 in preparation for lease to its wholly owned budget airline, Scoot.

The parent airline also decommissioned an A340-500 - an aircraft type used for its non-stop services to Los Angeles and New York - for sale to European planemaker Airbus. SIA has stopped its direct service to Los Angeles and will suspend its non-stop service to New York later this month.

As at Sept 30, the parent airline had a fleet of 103 passenger aircraft comprising 56 B777s, 24 A330-300s, 19 A380-800s and four A340-500s, with an average age of six years and seven months.

Commenting on its outlook, the group said the operating environment remained challenging, given the economic climate, and while advance bookings for the coming months are expected to be higher year-on-year, promotional activities and the strong Singapore dollar will continue to weigh on yields.

"Fuel prices are likely to remain high and volatile," it added.

Shares in SIA closed at $10.25 yesterday, down four cents.