SINGAPORE : Singapore Airlines (SIA) said Friday its first-half net profit fell 30 percent from last year, and warned the outlook was bleak as the eurozone debt crisis dents global business confidence.
Net profit in the six months ending September was S$168 million ($138 million), weighed down by a sharper 54 percent fall in second quarter earnings due to higher fuel prices and weak demand in the travel and cargo markets.
SIA's first quarter net profit had risen 73 percent on stronger passenger traffic but the growth was magnified by a low earnings figure for the corresponding period in 2011.
"The continuing European economic crisis is dampening global business confidence, exerting downward pressure on loads and yields of both passenger and cargo businesses," the leading Asian carrier said in a statement.
"These challenging market conditions are exacerbated by high and volatile jet fuel prices," said SIA, considered a bellwether for the premium airline industry.
Revenue climbed 4.0 percent to S$7.57 billion, but expenditures also advanced 4.0 percent largely on higher jet fuel costs.
Shukor Yusof, a Singapore-based regional aviation analyst with Standard and Poor's Equity Research, said the results were not that bad.
"While the results may not be as sterling...I think it's trending on the positive side really given that the markets have been battered in Europe which is one of their strongest markets," he told AFP.
"I think for us the main concern is not the near-term for SIA but rather the mid-term outlook - what is SIA's plan to counter the growing and increasing and real threat from low cost carriers and whether they have any plans to expand and grow their business other than just the premium sector."
The airline said it was continuously investing in new aircraft and upgrading its products and services, despite the challenging environment.
"The group remains vigilant in ensuring efficient deployment of its fleet in response to changes in demand patterns. A strict cost management regime is also in place to mitigate cost pressures," SIA said.
SIA and its budget subsidiary Scoot last month announced orders for 45 Airbus and Boeing aircraft in a multibillion-dollar expansion.
SIA said it was ordering five additional Airbus A380 superjumbos and 20 A350s in a deal estimated at US$7.5 billion.
Its long-haul budget airline Scoot, which started operations only in June and flies to several Asian destinations, said it would acquire 20 Boeing 787 Dreamliners with a total list price of more than US$4 billion.
Last month, SIA confirmed it had temporarily frozen its intake of cadet pilots, the second time in three years that the carrier had put a hold on fresh hiring.
In March, SIA encouraged its pilots to go on voluntary leave without pay and work for other companies as it struggles with high oil prices, stiff competition from regional and Middle East carriers and a worldwide aviation slowdown.
SIA's net profit in the year to March slumped 69 percent to S$336 million.
Before the results were announced, SIA shares closed at S$10.58, up 0.67 percent from the previous day.
- AFP/ch
SOURCE
On the surface it does look bad, but considering that SIA is still profiting in such economic climate, this news isn't that crippling after all. What it has to do now is devising a plan to compete with the low cost carriers which have been eating away the passenger loads especially with Asian destinations.
I believe when the economy turns for the better and the Europeans start feeling rich again, SIA will prosper.
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