tip off
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Singapore Airlines posts pluses and minuses for half year

Given the increased involvement of major foreign airlines in the Qantas and Virgin camps, it might be a good idea to track their financial results, which in the case of today’s half year results for Singapore Airlines, features some striking ticks and and crosses.

In the six months to 30 September, Singapore Airlines made a net profit of $SG 168 million (good) which is down $71 million or by 30% over the same six months reported a year ago (bad).

If it had owned the 10% of Virgin Australia it has just bought in those six months it would have gained $A 2.28 million profit share in that period, which would probably pay for a round of spectacularly expensive and sensationally served drinks in a sky top lounge about which everyone who has even been there professes amnesia.

Singapore Airlines says in its guidance that this headline result “was mainly attributable to lower non-operating items as the Parent Airline Company last year benefited from a higher surplus on the disposal of aircraft and spare engines”.

Group operating profit increased $8 million (+6%) year-on-year to $142 million (good). This was contributed by the improvement from the first quarter (+$61 million) (very good), albeit off a low base following the Japanese earthquake in the corresponding quarter last year (not so good).

However, the $61 million increase was partially offset by a weaker second quarter (-$53 million) (bad), with the widening of losses from SIA Cargo as the air freight market remained soft (alarming).

Group revenue grew $294 million (+4%) to $7,571 million (ordinary), on the back of 8.0% growth in passenger carriage (very encouraging), partially set off by a 3.4% decline in yields (not bad considering the sales growth). Group expenditure rose by $286 million (+4%) to $7,429 million, principally on account of higher fuel cost (+$112 million, or +4%) (in your dreams Qantas), arising from higher fuel volume uplift as capacity grew 5.1% (meaning SQ is managing fuel rather better than anyone else in this part of the world). Other variable costs also increased in line with the capacity growth.

The Parent Airline Company recorded an 8.0% increase in passenger carriage (in revenue passenger kilometres)(very strong) during the half year, exceeding the 5.1% capacity expansion (in available seat-kilometres) (outstandingly well managed). As a result, passenger load factor improved by 2.1 percentage points to 79.6% (but must do better next term).

SilkAir’s capacity growth of 23.1% was closely matched by the increase in passenger carriage, pushing passenger load factor marginally higher to 74.4%. (SilkAir is star of the group).

Despite reducing freighter capacity (in capacity tonne-kilometres) by 2.5%, cargo load factor declined 1.5 percentage points to 62.7%, as cargo carriage declined at a higher rate of 4.7% (in load tonne-kilometres) (total bummer all around).

The Company is declaring an interim dividend of 6 cents per share (tax exempt, one-tier), amounting to $70.5 million, for the half-year ended 30 September 2012 (versus 10 cents interim dividend in the previous year) (if it wasn’t Singapore, and if the shares weren’t locked up by institutions, there might be a demo outside HQ, but if it was an Australian airline, just how-long-has-it-been-since there was any dividend?).

Outlook: The continuing European economic crisis is dampening global business confidence, exerting downward pressure on loads and yields of both passenger and cargo businesses. These challenging market conditions are exacerbated by high and volatile jet fuel prices.

Despite the challenging environment, the Group’s strong balance sheet has enabled continued investment in new aircraft and in the upgrading of products and services. (Big pluses, a management that invests in the essentials, makes money, and pays dividends. In our dreams.)

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  • 1
    Roger
    Posted November 5, 2012 at 11:49 am | Permalink

    Great report, Ben. I love your side-comments!

  • 2
    The Doc
    Posted November 5, 2012 at 1:50 pm | Permalink

    I thought the alarming bit was passenger load factor was 79.8% and breakeven load factor is 79.6%. This means that one single passenger can make the difference between whether that flight operates at a loss or not

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