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SIA's Q4 operating loss widens to $60.3m

Friday, May 9, 2014 - 06:00

[SINGAPORE] Singapore Airlines (SIA) continues to battle crowded skies as it unveiled a bigger operating loss in its fourth quarter results, but its bottom line was saved by tax credits and exceptional gains which helped pull it out of the red.

The carrier has been facing stiff competition from both the cash-rich Gulf carriers and the rapidly expanding regional budget carriers, forcing it to sacrifice yields to fill seats.

For the fourth quarter ended March 31, its net profit nose-dived some 60 per cent year on year to $27 million. Its bottom line, however, was bolstered by $70.9 million in tax credits - without which it would have remained in the red - as well as $19.8 million in exceptional gains.

The exceptional items included an additional gain of $31 million from the 2012 sale of its 49 per cent stake in Virgin Atlantic to Delta Air Lines, which was partly offset by a provision for SIA Cargo's $6 million settlement in an Australian air cargo class action.

The net profit of $27 million beat the $8 million average expected by four analysts, according to a Bloomberg poll.

For the quarter under review, revenue slipped 1.1 per cent year on year to $3.63 billion on the back of lower passenger and cargo carriage, as well as weaker yields.

Operating loss for the fourth quarter deepened to $60.3 million from $44.2 million previously, even as expenditure - including fuel, which eased 4 per cent - came down from $3.71 billion to $3.69 billion.

Both the parent airline company and SIA Cargo reported operating losses for the quarter, the group said.

Earnings per share for the quarter worked out to 2.3 cents, down from 5.8 cents a year ago.

The group warned that the operating environment would remain challenging, given the widespread competition and economic uncertainty in key markets.

Fuel prices, a big contributor to expenses, are likely to remain high by historical standards.

SIA said: "Passenger bookings in the current quarter are expected to match the planned increase in capacity. However, yields are expected to remain under pressure due to promotional activities undertaken to support loads, and other airlines offering aggressive fares while increasing capacity."

For the full year, net profit slipped 5.1 per cent to $359.5 million, dragged down by a $38.3 million loss in exceptional items and a weaker share of results from associated companies, mainly Tiger Airways in which SIA holds a 40 per cent stake. The group's share of losses from Tigerair deepened to $118 million for the year, an increase of $109 million.

Last week, the budget carrier revealed a loss of $223 million for the financial year ended March 31; this was its third consecutive year of loss, the size of which is almost five times the $45.39 million of the previous fiscal year.

Meanwhile, SIA's revenue for the full year edged up one per cent to $15.24 billion, which came largely from higher passenger revenue, although at lower yields due to the depreciation of key currencies and lower fares to woo travellers.

However, the group did turn in an operating profit of $259.3 million, up 13.1 per cent, for the full year. The parent airline company's operating profit improved by $69 million to $256 million; SIA Engineering and regional wing SilkAir reported weaker operating profits of $116 million and $35 million respectively. SIA Cargo turned in a loss of $100 million, albeit narrowing from $167 million a year ago.

For the coming financial year, capacity growth for the parent airline company is expected to be kept to one per cent. The airline will grow its fleet to 105 aircraft by March next year, from 103 planes as at end March this year; it will take delivery of new planes and decommission others or return them to lessors.

The outlook for cargo is expected to remain bleak, as overcapacity in the industry continues to put pressure on cargo yields, said SIA.

The group is expected to give more details on its financial results at a briefing today.

The board has recommended a final dividend of 11 cents per share, plus a special dividend of 25 cents per share. Including the interim dividend, this takes the total dividend for the financial year to 46 cents per share.

Cash and cash equivalents stood at $4.88 billion as at end-March, compared to $5.06 billion a year ago.

In the stock market yesterday, the SIA counter closed at $10.25, down three cents.