Singapore Airlines saw its 3Q net profit tumble with its cargo division making a loss on the back of declining load factors and yields.
Singapore Airlines has posted a fiscal third-quarter net profit down 43 per cent amid significant fuel-hedging losses, shrinking demand for cargo and passenger travel.
Of the parent airline’s four other business units – SATS Group, SIA Engineering, SilkAir and SIA Cargo – the cargo division was the only one to turn in a loss, amounting to S$46 million (US$30.4 million), compared with a profit of S$73 million for the same period a year earlier.
SIA Cargo carried 14.2 per cent less freight (in load tonne-kilometres) than the corresponding period last year. With capacity decreasing at a slower rate (-7.5 per cent in capacity tonne-kilometres), cargo load factor fell 4.5 percentage points to 58.4 per cent.
Cargo break even load factor increased 5.5 percentage points to 63.4 per cent, from higher unit cost (+3.4 per cent) and weaker yield (-5.7 per cent).
Group net profit for the three months ended 31 December totaled S$337 million (US$225.6 million), down from S$590 million a year earlier, with the carrier saying, “demand for air transportation will remain weak for much of 2009”. Revenue declined 2.6 per cent to S$4.16 billion.
Singapore Airlines said it booked an oil-hedging loss of S$341 million for the quarter. The carrier noted that while the price of jet fuel corrected from its peak of US$171 per barrel recorded in July 2008, averaging US$99 per barrel in the third quarter– reducing expenditure on fuel by S$125 million – it recorded losses on fuel hedging amounting to S$341 million.
Other cost items were well contained. Excluding fuel, Group expenditure was $125 million (-5.5 per cent) lower compared to the same period last year. Further loses on fuel hedging are likely unless the price of oil spikes, as the group said it has for the fourth quarter ending in March, hedged 44 per cent of its fuel requirements at US$131 a barrel. Jet fuel is currently trading around US$55 a barrel.
Foreign-exchange rate movements also had an impact on operating profit, lowering it by S$144 million, “as major revenue-generating currencies, particularly the Australian dollar, the UK pound and the euro, weakened against the Singapore dollar, even as the Japanese yen and the US dollar strengthened,” Singapore Airlines said.
