Singapore Air Q3 net falls 43 percent
February 10, 2009
SINGAPORE (Reuters) - Singapore Airlines, the world's largest airline by market value, posted a 43 percent drop in quarterly profit, hurt by hedging losses and slowing demand for travel and cargo amid a global economic downturn.
Singapore Air <SIAL.SI>, which ranks ahead of Japan's All Nippon Airways <9202.T>, also warned that demand for air transport will remain weak this year as global trade slows. The city-state's flag carrier may continue to scale back flights and reduce capacity to cope with the downturn.
Singapore Air, 55 percent-owned by state investor Temasek Holdings <TEM.UL>, has seen declining passenger demand as the global slowdown crimps corporate and leisure travel, forcing it to cut flights to other Asian cities.
Global passenger traffic will fall 3 percent this year, the first drop since 2001, and airline losses will total $2.5 billion, putting hundreds of thousands of industry jobs at risk, the International Air Transport Association (IATA) said in December.
Singapore Air's October-December net profit fell to S$337.2 million ($225 million) from S$590 million, beating a forecast for S$312 million by four analysts.
For Graphic on SIA's earnings, click
https://customers.reuters.com/d/graphics/SG_SIAQ0209.gif
The airline saw some relief on the cost side as jet fuel prices fell sharply. Jet fuel traded in Singapore more than halved in October-December from a year ago amid a sharp drop in crude oil prices.
However, Singapore Air suffered S$341 million in hedging losses, as the airline had purchased in advance part of the fuel requirements when fuel costs were higher.
The hedging losses may continue in the current quarter as the carrier hedged 44 percent of its jet fuel requirements at an average cost of $131 per barrel.
Quarterly revenue for the airline, which derives about half its sales from first-class and business travelers, was S$4.16 billion compared with S$4.27 billion a year ago.
Analysts said Singapore Air may have suffered less damage than rivals in the current economic downturn, but warned margins could fall sharply as businesses cut costs.
"We think passenger yield could fall sharply from here, negatively affecting the carrier's future profitability," Morgan Stanley said in a client note ahead of the earnings.
Australia's Qantas Airways Ltd <QAN.AX> last week said its first-half profit fell by two-thirds as high fuel costs and a downturn in international travel pinched, and it raised A$500 million ($323 million) by selling new shares.
SIA shares fell more than a fifth in October-December, while the benchmark Straits Times index <.FTSTI> lost 25 percent. Shares in rival Cathay Pacific <0293.HK> fell 33 percent and Qantas lost 16 percent.
(Reporting by Saeed Azhar, Editing by Ian Geoghegan)
February 10, 2009
SINGAPORE (Reuters) - Singapore Airlines, the world's largest airline by market value, posted a 43 percent drop in quarterly profit, hurt by hedging losses and slowing demand for travel and cargo amid a global economic downturn.
Singapore Air <SIAL.SI>, which ranks ahead of Japan's All Nippon Airways <9202.T>, also warned that demand for air transport will remain weak this year as global trade slows. The city-state's flag carrier may continue to scale back flights and reduce capacity to cope with the downturn.
Singapore Air, 55 percent-owned by state investor Temasek Holdings <TEM.UL>, has seen declining passenger demand as the global slowdown crimps corporate and leisure travel, forcing it to cut flights to other Asian cities.
Global passenger traffic will fall 3 percent this year, the first drop since 2001, and airline losses will total $2.5 billion, putting hundreds of thousands of industry jobs at risk, the International Air Transport Association (IATA) said in December.
Singapore Air's October-December net profit fell to S$337.2 million ($225 million) from S$590 million, beating a forecast for S$312 million by four analysts.
For Graphic on SIA's earnings, click
https://customers.reuters.com/d/graphics/SG_SIAQ0209.gif
The airline saw some relief on the cost side as jet fuel prices fell sharply. Jet fuel traded in Singapore more than halved in October-December from a year ago amid a sharp drop in crude oil prices.
However, Singapore Air suffered S$341 million in hedging losses, as the airline had purchased in advance part of the fuel requirements when fuel costs were higher.
The hedging losses may continue in the current quarter as the carrier hedged 44 percent of its jet fuel requirements at an average cost of $131 per barrel.
Quarterly revenue for the airline, which derives about half its sales from first-class and business travelers, was S$4.16 billion compared with S$4.27 billion a year ago.
Analysts said Singapore Air may have suffered less damage than rivals in the current economic downturn, but warned margins could fall sharply as businesses cut costs.
"We think passenger yield could fall sharply from here, negatively affecting the carrier's future profitability," Morgan Stanley said in a client note ahead of the earnings.
Australia's Qantas Airways Ltd <QAN.AX> last week said its first-half profit fell by two-thirds as high fuel costs and a downturn in international travel pinched, and it raised A$500 million ($323 million) by selling new shares.
SIA shares fell more than a fifth in October-December, while the benchmark Straits Times index <.FTSTI> lost 25 percent. Shares in rival Cathay Pacific <0293.HK> fell 33 percent and Qantas lost 16 percent.
(Reporting by Saeed Azhar, Editing by Ian Geoghegan)
