SIA warns of 'significant challenges' from virus outbreak

Singapore

SINGAPORE Airlines (SIA) posted a 10.9 per cent rise in its Q3 net profit on Friday, but warned that the growing scale of the Covid-19 outbreak would pose "significant challenges" to the group as it looked to "tightly" manage costs ahead.

In a news statement, the national carrier said demand for services to mainland China has been "severely affected", with SIA and SilkAir drastically reducing frequencies on all mainland China routes in February and March 2020. Scoot has also suspended all flights to mainland China until March 28, 2020.

"Amidst this challenging environment, the SIA group will continue to be proactive and nimble in making appropriate network adjustments and managing costs tightly," the national carrier said.

It also said its "transformation programme" has strengthened the group's revenue generating capabilities and driven operational efficiencies while maintaining high service standards.

"Together with our strong liquidity, this provides the group with the resilience to weather the current challenges."

Improvement in performance by associates and joint ventures (JVs) led SIA to post a 10.9 per cent increase in net profit for the third quarter to S$315 million from S$284 million a year ago, SIA reported.

The group reported an earnings per share of 26.6 Singapore cents versus 24 cents a year ago. No dividend was declared for the period. It is SIA's practice to declare dividends, if any, at half- and full-year results announcements.

Group revenue for the quarter rose 3 per cent to register a record high of S$4.5 billion on the back of initiatives from its three-year transformation plan yielding results as well as strong growth in passenger revenue.

Passenger revenue grew by 7 per cent boosted by robust traffic growth. Cargo revenue, on the other hand, declined S$112 million as a result of weak cargo demand amid trade uncertainties and an export manufacturing slowdown in Europe and Asia.

Group expenditure increased 1.7 per cent to S$4 billion as a result of higher non-fuel expenditure. Non-fuel expenditure rose 4.2 per cent on capacity increase and higher traffic, which was partially offset by lower net fuel cost primarily due to a decrease in average jet fuel price post-hedging.

For the nine months ended Dec 31, 2019, net profit jumped 8.3 per cent to S$520 million from S$480 million a year ago. Total revenue for the nine months recorded an improvement of 4.5 per cent to S$12.8 billion while total expenditure contracted by 4.4 per cent to S$11.9 billion. Meanwhile operating profit inched up by 5.9 per cent to S$862 million.

Operating performance across the companies in the group remained stable with better showing from the parent airline firm and Scoot.

Operating profit for the parent airline company rose 11.9 per cent to S$413 million year-on-year due to growth in passenger revenue.

SilkAir recorded an operating profit of S$7 million, flat against last year as capacity fell 8.2 per cent due to the grounding of the 737 MAX 8 fleet as well as the progressive transfer of routes to Scoot.

Scoot reaped an operating profit of S$4 million, up S$3 million from a year ago, supported by higher passenger traffic.

SIA Engineering's operating profit stood at S$16 million year-on-year with a 1.5 per cent decline in revenue mainly attributable to reduction in airframe and line maintenance revenue.

The group is also expecting volatility in fuel prices to persist but said that its hedging policy will provide stability to net fuel costs.

SIA shares advanced three Singapore cents or 0.35 per cent to finish at S$8.62 on Friday.

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