Business

Wednesday November 11, 2009

SIA reports Q2 loss but sees outlook improving


SINGAPORE: Singapore Airlines (SIA), the world’s biggest carrier by market value, reported a worse-than-expected quarterly loss as the global economic slowdown hit margins, but the airline said the outlook has improved.

“Advance bookings indicate that demand for air travel has stopped declining and is gradually recovering,” SIA said in a statement.

“Market conditions allow for some rollback of promotional pricing but yields are unlikely to get back to pre-crisis levels within the next six months,” it added.

SIA has seen falling passenger and cargo demand this year as a global recession hurt business and leisure travel, forcing it to reduce capacity by 11% in the 12 months from April. The airline also cut staff salaries and working hours.

Analysts said the growing presence of budget airlines in the region is making life tougher for premium carriers like SIA and Japan Airlines (JAL).

Malaysia’s AirAsia and Australia’s JetStar are on an aggressive expansion drive despite the downturn and have begun to offer long-haul flights in addition to shorter routes.

JAL, Asia’s largest carrier by revenues, is undergoing a drastic restructuring and negotiating for further government support after racking up billions of dollars in losses.

SIA, which warned in July it could post a full-year loss if tough conditions persist, reported a net loss of S$159mil (US$114.6mil) compared to a net profit of S$324mil a year ago.

But the fiscal second quarter loss was narrower than the S$307mil recorded in the previous three-month period. Five analysts polled by Reuters had estimated a net loss of S$38mil loss on average.

The carrier, 55% owned by state investor Temasek Holdings, has also delayed deliveries for eight airplanes from Airbus by 6-12 months.

Despite its full-year profit warning, analysts polled by Thomson Reuters I/B/E/S forecast SIA will book a net profit of S$183.6mil in the current financial year, down from S$1.06bil in the previous year.

That would be its smallest full-year profit since at least 1988, according to Thomson Reuters data.

Ng Kian Teck, an analyst with SIAS Research, said before the results the outlook for SIA has improved in recent months, helped by an economic recovery in Asia and prospects of a rise in the number of visitors to the city-state.

Visitor arrivals to Singapore registered its first year-on-year growth in September, rising 7.1% from the same period last year after declining for 15 consecutive months.

“Tourism into Singapore should improve with the launch of the two integrated resorts but oil prices will remain a threat,” he said.

SIA’s capacity cut resulted in an improvement in its overall load factor but yields, or the amount of revenue per passenger, remain under pressure as it cuts prices to attract flyers. — Reuters


For another perspective from The Straits Times, a partner of Asia News Network, click here.


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