SIA Q2 operating profit soars to record, resumes dividend payout

SINGAPORE Airlines (SIA) announced record operating profits for both its second quarter and first half financial year ending Mar 31, 2023.

The outsized performance was driven by high demand for air travel during the peak summer season across all route regions, except East Asia. This resulted in a Q2 FY2023 operating profit of S$678 million, up 21.9 per cent from S$556 million in the previous quarter. It was the highest quarterly operating profit in SIA’s history. Second quarter net profit surged 50.5 per cent to S$557 million from S$370 million in the previous quarter.

Revenue for the quarter to Sep 30 rose in tandem to S$4.5 billion, up 14.3 per cent from S$3.9 billion in Q1 FY2023. In bourse filings after the market close on Friday (Nov 4), the airline also announced the resumption of dividend payments, with an interim dividend of S$0.10 per share to be paid in December.

Passenger flown revenue hit S$3.3 billion for Q2 FY2023, as traffic jumped 22 per cent, outgrowing capacity expansion of 11.3 per cent. However, cargo flown revenue fell 8.5 per cent quarter on quarter to S$1 billion, the fourth consecutive quarter crossing the S$1 billion mark. The fall was due to softening air freight demand and intensifying competition.

Expenditure grew 13 per cent quarter on quarter to S$3.8 billion, driven by a S$150 million increase in net fuel cost and a S$288 million increase in non-fuel expenditure. Net fuel cost rose to S$1.4 billion, but was partially offset by higher fuel hedging gains. The non-fuel expenditure tracked the increase in passenger and cargo capacity.

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SIA is on track to hire about 3,000 cabin crew by the end of the financial year. It has also resumed cadet pilot recruitment to keep pace with operational needs, as well as fleet and network expansion plans. The airline expects demand to be strong heading into the peak year-end travel season.

Passenger demand is expected to pick up in Hong Kong, Taipei and Japan after recent relaxation of border controls. Forward sales are also expected to remain buoyant in the months leading to the Chinese New Year. Cargo demand is projected to be weaker than last year, as the traditional air cargo peak period is expected to be muted. This is due to the anticipated impact of macroeconomic headwinds on consumer demand, and fewer production orders as importers clear existing inventories. The return of belly hold cargo from the resumption of passenger flights is also likely to put pressure on cargo yields.

SIA acknowledges that high fuel prices, inflationary pressures, geopolitical issues and macroeconomic uncertainties as well as a risk of a global recession could pose challenges to passenger and cargo demand.

“The group is committed to continue strengthening its operational resilience and financial sustainability, exercising cost discipline while seizing revenue and growth opportunities as they arise,” said SIA.