Singapore Airlines’ first-quarter net profit soared 73 percent from last year, it said Wednesday, July 25, 2012, partly driven by higher passenger traffic.
SINGAPORE—Singapore Airlines’ first-quarter net profit soared 73 percent from last year, it said Wednesday, partly driven by higher passenger traffic.
But the growth statistic was magnified by a low profit figure for the corresponding period in 2011, when it was hit by higher fuel costs and soft demand due to the earthquake and tsunami disasters in Japan.
The carrier, considered a bellwether for the full-service airline industry, said net profit came in at Sg$78 million ($62 million) for the quarter to June 2012, compared with Sg$45 million last year, and was in line with analysts’ expectations.
Group revenue advanced six percent to Sg$3.78 billion, while expenditure climbed four percent to Sg$3.71 billion.
SIA shares closed at Sg$10.69 apiece at the stock market before the report was released.
Earnings were boosted by a rise in passenger volumes as it offered a host of promotions to bolster loads amid intense competition and a weak global economy, the airline said in a statement.
But it painted a gloomy outlook for the rest of the year in a “difficult environment,” with the price of jet fuel – which accounts for 40 percent of total expenditure – still near historical highs despite retreating.
“The global economy remains uncertain as Europe struggles to contain its debt crisis, while the United States faces a sluggish recovery,” said the airline, which analysts said gets over half of its earnings from premium passengers.
“This has negatively impacted business confidence and the outlook for travel demand. Promotional efforts undertaken to boost carriage add downward pressure on yields, especially in Europe and the United States,” it added.
SIA said the cargo business also remained under pressure, with forward indicators signaling weaker demand.
SIA is facing stiffer competition from emerging full-service carriers like those from the Middle East – which have narrowed the gap in in-flight services at lower ticket prices – as well as from the increasingly popular budget airlines plying regional routes.
“Going forward, it is going to be tough,” said Shukor Yusof, an analyst with Standard and Poor’s Equity Research.
“Beyond the traditionally strong summer season, they will again face difficulties in terms of maintaining their status as the premium carrier in the world,” he told AFP.
Low-cost carriers, which have “increased their strength from year to year,” are also giving SIA tougher competition, Shukor said.
“But with a strong balance sheet, there is a strong possibility that they can still remain in the black for the full financial year,” he added.
SIA’s current financial year ends March 2013.
The airline’s full-year net profit ended March 31 this year slumped 69 percent after a rare loss in the fourth quarter of 2011 due to high oil prices and global economic uncertainty.
That was only the third quarterly loss in the history of the airline.