Singapore Airlines Ltd., Southeast Asia’s biggest airline, reported profit that missed analyst estimates for a fifth consecutive quarter on cheaper fares to carry passengers and cargo.
Net income rose 5.4 percent to S$142.5 million ($115 million) in the three months ended December, the airline said in a statement yesterday, missing the S$161 million average of four analysts’ estimates compiled by Bloomberg.
Singapore Air shares fell to the lowest level in a week after saying yield from carrying passengers dropped 5.8 percent in the third quarter, trimming gains from selling more tickets. Chief Executive Officer Goh Choon Phong, 49, upgraded business- class cabins, sold a stake in Virgin Atlantic Airways Ltd. last year, and started operating a new budget carrier Scoot Pte as competition with Middle East carriers such as Emirates and low- fare airlines increases.
“Disappointing results reinforce our conviction thesis that Singapore Air is losing its allure as a result of the shift in power dynamics,” Citigroup Inc. analyst Rigan Wong said in a note yesterday. “Yield deterioration is our biggest concern.”
Passenger yield, the average price a traveler pays to fly one kilometer, fell to 11.4 Singapore cents from 12.1 cents a year earlier, Singapore Air said in the statement. Yields from carrying cargo dropped to 33.5 cents from 34.7 cents a year earlier, the company said in the statement.
Revenue fell 0.4 percent to S$3.86 billion.
The shares fell as much as 1.4 percent to S$11, the lowest price since Jan. 31, and traded at S$11.02 as of 9:44 a.m. in Singapore. The stock has gained 2.5 percent this year.
The airline carried 4.69 million passengers between October and December, compared with 4.36 million a year earlier, according to the company’s monthly filings to the Singapore stock exchange. The carrier filled an average 79.3 percent of its seats in the quarter, compared with 77.2 percent a year ago.
“Loads and yields of both passenger and cargo business are expected to remain under pressure, while the price of jet fuel continues to be at a historical high,” Singapore Air said in the statement. “The depreciation of revenue-generating currencies against the Singapore dollar poses yet another challenge.”
The average price of jet fuel rose 1.7 percent in the October-December period to $126.91 per barrel, according to data compiled by Bloomberg.
Premium-ticket prices between Asia and the U.S. averaged $5,859 in December, the lowest level since 2009, according to data compiled by Bloomberg. Wall Street’s cost cuts and dismissals have helped erase more than 300,000 financial- industry jobs in the past two years while companies have trimmed their travel budgets.
Cathay Pacific Airways Ltd., which reports earnings next month in Hong Kong, said in January that ticket sales at the front of the cabin fell short of its expectations in December.
Global air passenger traffic grew 5.3 percent last year, boosted by the expansion of Middle Eastern carriers and demand from markets in Latin America and Africa, the International Air Transport Association said on Jan. 31. Cargo demand fell 1.5 percent in 2012. Passenger traffic may grow 4.5 percent in 2013, with cargo markets projected to increase 1.4 percent, IATA said.
“The impact of the promotional fares on both economy-class travel and emptying out of the front of the airplane has had a worse impact than anticipated,” said Timothy Ross, an analyst at Credit Suisse AG. “Banks and multinational firms all need to start feeling like they are earning money before they change their travel policies.”
Singapore Air faces increased competition as Qantas Airways Ltd., Australia’s biggest, formed an alliance last year with Emirates, the Middle East’s largest airline. The tie-up has received provisional approval from Australia’s antitrust regulator in December.
To compete, Singapore Air last year agreed to buy a 10 percent stake in Virgin Australia Holdings Ltd. for A$105 million ($108 million). Virgin Australia took control of the Australian arm of Tiger Airways Holdings Ltd.
Singapore Air is the largest investor in Tiger, a short- haul low-fare airline that takes on AirAsia Bhd., Lion Mentari Airlines PT and a dozen other budget carriers that fly in the Southeast Asian region.
Last year, Scoot, a medium-haul budget airline fully owned by Singapore Air, started flying with Boeing 777 aircraft. Singapore Air transferred its orders for the Boeing 787 Dreamliners to Scoot.
Singapore Air in December agreed to sell its 49 percent stake in Virgin Atlantic to Delta Air Lines Inc. (DAL:US) for $360 million. The carrier had earlier written down its investment in the U.K. carrier controlled by billionaire Richard Branson. The deal is expected to close in the fourth quarter.
To cut costs, the airline is offering captains voluntary no-pay leave. The company has a “temporary” surplus of captains, spokesman Nicholas Ionides said last month. Singapore Air last year offered first officers unpaid voluntary leave. The airline last month said it will release 76 pilots that were employed on fixed-terms by June 30 before their contracts expire.
To contact the reporter on this story: Kyunghee Park in Singapore at firstname.lastname@example.org
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