Business

Wednesday May 14, 2008

SIA profit fall not as bad as feared, warns of slower demand


SINGAPORE: Singapore Airlines (SIA), the world’s second-biggest airline by market value, saw quarterly profit yesterday fall a less-than-feared 21% and warned of slower demand amid record fuel costs.

SIA, which relies on premium and business travellers for about half its revenues, cautioned the current turmoil in global financial markets has clouded the outlook for air travel.

“The results blew the consensus away. It seems their fuel hedging has been done pretty well which contributed to higher operating profit,” said Morgan Stanley analyst Chin Lim.

The lower profit was mostly due to a one-off tax gain a year ago. Analysts say SIA could still be hurt by a drop in business travel due to the ongoing US credit crisis, after the carrier reported four consecutive months of lower passenger traffic from North America since December due to slowing demand.

In April, the International Air Transport Association (IATA) slashed its 2008 profit forecast for the airline industry for the second time in four months, to reflect a deepening global economic gloom and record high fuel costs.

Benchmark Asian jet fuel prices hit a new record over US$159 per barrel yesterday and are up about 44% since the start of the year, reflecting the rise in global oil prices.

“The combination of a global economic slowdown and record high fuel prices will make this a more challenging year for airlines,” Singapore Air said in a statement.

SIA said January-March net profit was S$527.5mil (US$386.2mil) compared with S$671mil a year ago. That beat an average forecast of S$364mil from 11 analysts polled by Reuters.

The year ago period was boosted by a gain of S$247mil due to a tax write-back that followed a cut in Singapore’s corporate tax rate.

Operating profit for Singapore Air, 55% owned by state investment firm Temasek, was S$468.1mil, compared with S$333.5mil a year ago.

The carrier recommended a final dividend of 80 Singapore cents per share to be paid in August, bringing its total dividend for the last financial year to 100 cents per share. – Reuters

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