SIA Q1 net profit sinks on costlier fuel, absence of non-recurring items

SINGAPORE Airlines' (SIA) first-quarter net profit for FY18/19 slumped to S$139.6 million from S$337.9 million a year ago, weighed down by rising fuel costs and the absence of one-off gains.

The corresponding quarter a year ago was bolstered by KrisFlyer breakage rate adjustments and compensation for changes in aircraft delivery slot which totalled S$175 million. Stripping out the one-off items in the prior year, net profit would have fallen by 27.5 per cent or S$53 million, the airline said.

Revenue for the quarter was nearly flat at S$3.84 billion versus S$3.86 billion a year ago, as the growth in passenger and cargo revenue more or less outweighed the absence of non-recurring items. Earnings per share worked out to 11.8 Singapore cents, down from 28.6 cents a year ago. 

Operating profit nosedived to S$193.1 million, more than half from S$404.6 million previously, as net fuel costs rose by S$154 million, driven by a near 40 per cent spike in the average jet fuel price. Fuel costs before hedging actually rose by S$312 million, but half of this increase was mitigated by hedging gains. 

SIA said: "Passenger traffic is expected to grow in the coming months, although competition in key operating markets persists. Costs remain under pressure, especially from higher fuel prices. Cargo demand in the near term is steady despite concerns over global trade tensions, the escalation of which could potentially have a longer-term impact on air cargo demand."

For the remaining nine months of the financial year, the group has hedged 46.3 per cent of its fuel requirements in MOPS (21.8 per cent) and Brent (24.5 per cent) at weighted average prices of US$65 and US$54 per barrel respectively.

Singapore's flag carrier went on to say that good progress had been made in the first year of its transformation efforts. Last year, it kicked off the three-year programme to grow revenue, enhance customer experience and improve operational efficiencies amid intensifying competition.

SIA closed at S$10.80 - down 14 cents - on Thursday. Its results were released after the market had closed.