Bloomberg News

Singapore Air Second-Quarter Net Falls on Higher Fuel Costs

November 07, 2011

(Updates with closing share price in fifth paragraph.)

Nov. 4 (Bloomberg) -- Singapore Airlines Ltd., the world’s second-largest carrier by market value, posted a 49 percent drop in second-quarter profit because of higher fuel costs and rising competition from discount carriers.

Net income fell to S$194 million ($153 million) in the three months ended Sept. 30 from S$380 million a year earlier, the Singapore-based airline said in a statement yesterday. That compares with the S$177 million median of three analysts’ estimates compiled by Bloomberg News.

Advance passenger bookings are showing “signs of weakness,” especially in Europe and the U.S. as prevailing economic uncertainty is damping demand, Singapore Air said. The airline this week detailed its plans to start a low-cost long- haul unit, called Scoot, next year to fend off competition from Jetstar and AirAsia Bhd. for budget travelers.

“Passenger yields have been falling at Singapore Airlines and the market really wants to see some stabilizing there,” said K. Ajith, an analyst at UOB-Kay Hian Holdings Ltd. in Singapore, who has a “buy” rating on the stock. “Premium traffic has been weaker and that’s a big factor for them.”

Singapore Air was little changed at S$11.28 at close of trading in the city-state. The benchmark Straits Times Index gained 1.4 percent. The airline has dropped 30 percent in the past year.

Fuel costs rose 29 percent in the quarter from a year earlier while passenger load factors declined, crimping profitability. Jet kerosene prices averaged $125.78 a barrel during the quarter in Singapore trading, compared with $86.65 a year earlier, according to Bloomberg data.

‘Weak Outlook’

“Exacerbating the impact of the weak outlook is the high cost of fuel, which is compounded by the recent strength in the U.S. dollar,” Singapore Air said. “Forward prices for jet fuel remain high and volatile.”

Higher fuel expenses also damped earnings at Emirates, the world’s biggest airline by international traffic. Net income in the six months ended Sept. 30 tumbled 76 percent, the Dubai- based company said yesterday.

Singapore Air’s passenger load factor, or the percentage of seat filled by paying customers, declined for a 14th straight month in September on a year-on-year basis.

Singapore Air’s namesake unit filled 79.3 percent of total available seats in the second quarter, compared with 80.3 percent a year earlier, the carrier said. Passenger numbers rose 3.6 percent to 4.31 million. Yield, the average price a traveler pays to fly one kilometer, was 11.7 Singapore cents compared with 11.8 cents a year ago.

Tiger, Virgin

SIA Engineering Co., the company’s 80 percent-owned maintenance business, last week posted second-quarter profit of S$71.2 million, a 7.1 percent gain from the year earlier.

The new unit Scoot will operate four Boeing Co. 777-200 planes bought from the parent and offer fares up to 40 percent cheaper than full-service carriers. Singapore Air also has a stake in short-haul budget carrier Tiger Airways Holdings Ltd. and controls 49 percent of Virgin Atlantic Airways Ltd.

Separately, Munich Airport said yesterday that a Boeing Co. 777 plane operated by Singapore Air slid off its south runway while landing. No passengers were injured in the incident that involved a flight from Manchester, England.

--Editors: Vipin V. Nair, Garry Smith.

To contact the reporter on this story: Robert Fenner in Melbourne at

To contact the editor responsible for this story: Neil Denslow at

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