SQ falls flat

SQ falls flat
By admin

Singapore Airlines has reported flat operating results in the first half of the 2014-15 financial year, with passenger yields remaining under pressure and net profit severely affected by associates’ losses.

The group recorded an operating profit of $171 million in the first half of the financial year, which marks an improvement of 1.2% over the same period last year, however group revenue was down by $154 million, largely due to lower incidental revenue stemming from reduced compensation pertaining to changes in aircraft delivery slots, and lower income from the lease of aircraft.

Passenger revenue was also lower year-on-year, but there was nevertheless a 1.4% increase in traffic as a result of yield declines amid the competitive operating environment.

Cargo revenue also fell by 1.6%, driven by capacity cuts of almost 4%, though this was partially compensated for by better yields and higher load factors.

Group expenditure was down $156 million compared to the previous financial year, with fuel costs after hedging dropping by $154 million, caused primarily by lower volume uplifted, a weaker US dollar against the Singapore dollar, and a 0.4% decline in jet fuel prices after hedging.

The share of results of associated companies fell $154 million, largely attributable to the Group’s share of Tiger Airways’ loss of $129 million, which included material charges relating to the sublease of surplus aircraft and sale of Tigerair Australia.

The commencement of equity accounting for Virgin Australia from the second quarter further also contributed to the weaker results, recording a drop of $16 million.

SilkAir's operating profit declined $17 million (-77.3%), as weaker yields put a drag on revenue and capacity injection pushed operating expenditure up.

Demand is generally flat, and yields will remain under pressure amid intense competition from other airlines and promotional activities in weaker markets.

While there has been a reprieve from cost pressures arising from the decline in fuel prices in recent months, there is concern that the decline reflects a slow-down in major economies in the world, which could ultimately hurt travel demand.

The Group has stated it will continue to track movements closely and make appropriate adjustments to capacity, ensuring it is positioned to meet future challenges. 

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