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SIA's Q4 earnings down 28%, full-year gain slumps 47%; airline sees fuel costs headwinds
SINGAPORE Airlines capped fiscal 2019 with a 28 per cent fall in fourth-quarter bottom line earnings to S$202.6 million from S$281 million a year ago, on the back of lower operating profit and higher non-operating costs related to SilkAir's refleeting and restructuring.
For the full year, the national carrier's net profit fell 47.5 per cent to S$683 million despite a record revenue of S$16.3 billion, from S$15.8 billion a year ago. Operating profit and dividends were also down.
For Q4, operating profit declined 24 per cent to S$253 million even though revenue grew 1.4 per cent to S$4.08 billion. The results were dented by higher net fuel costs - which rose 8 per cent - and non-fuel costs on capacity injection. Non-fuel costs increased 2.1 per cent, below the group's passenger capacity growth of 8 per cent.
Group RASK (measured in revenue per available seat-kilometre) was flat on a quarterly and annual basis at 7.7 Singapore cents while passenger load factor for the period improved 0.3 percentage points to 82 per cent.
During the three months to March, the parent airline company's passenger flown revenue was up 7 per cent owing to strong growth in carriage, led by North Asia and Americas. "Difficult trade conditions" drove revenue from the cargo segment down by 6.6 per cent on lower loads.
An increase in costs due to fuel and growth in operations led to a 28 per cent drop in the parent airline's operating profit to S$204 million while SilkAir posted a nearly four-fold increase to S$11 million partly, thanks to lower costs.
Scoot performed dismally, posting an operating loss of S$6 million versus a profit of S$21 million as costs of expansion outweighed revenue growth.
For the full year, the national carrier's net profit fell 47.5 per cent to S$683 million on the back of record revenue of S$16.3 billion from S$15.8 billion a year ago. The group attributed the record revenue and "solid" operating profit of S$1.07 billion, albeit 31 per cent lower from a year ago, to its transformation initiatives.
Earnings per share for the quarter stood at 17.1 Singapore cents versus 23.8 Singapore cents a year ago.
The board recommended a final dividend of 22 Singapore cents per share from 30 Singapore cents in the previous corresponding period. Including an interim dividend of eight Singapore cents per share, total dividend for FY19 works up to 30 Singapore cents per share, lower than 40 Singapore cents in FY18.
The group said fuel cost headwinds may persist on supply risks in the oil market and the effect of higher fuel prices should be mitigated by its significant fuel hedges.
For the financial year 2019/2020, SIA has hedged 64 per cent of its fuel requirement in MOPS (Singapore jet kerosene) and 5 per cent in Brent at weighted average prices of US$76 and US$53 per barrel, respectively. Longer-dated Brent hedges with maturities extending to the financial year 2024/25 cover up to 46 per cent of the group's projected annual fuel consumption, at average prices ranging from US$58-US$63 per barrel.
According to Bloomberg, jet fuel prices averaged US$74.50 a barrel for the March quarter.
The carrier said its passenger capacity growth was affected by issues related to the Boeing 737 MAX 8 fleet, which have led to its suspension from service until further notice, as well as issues with Rolls-Royce Trent 1000 TEN engines powering Boeing 787s. As a result, it expects passenger capacity to grow 6 per cent in the year ahead.
While most key markets, including those that have seen significant capacity growth such as the US, Japan, Indonesia and New Zealand, continue to grow at a healthy pace, the airline group said that China's international traffic growth rates have softened amid increased supply in the market.
The ongoing trade dispute and slowing economic growth in key markets pose uncertainty to the operating environment, it added.
SIA stock fell four Singapore cents or 0.4 per cent to finish at S$9.40 on Thursday.