SIA Group's First Quarter Operating Profit improves to $274 Million

The SIA Group achieved an operating profit of $274 million in the first quarter of 2006-07; an increase of 8.2% on last year as a result of strong demand and revenue growth.

Group revenue at $3,421 million - a record for any first quarter in the group’s history - was $377 million (+12.4%) higher than last year. Group expenditure amounted to $3,147 million, up 12.8% from last year, mainly due to higher fuel costs.

Fuel accounted for 38.9% of the group expenditure, up 6.9 percentage points from the previous year. Net of hedging, fuel expenditure rose $331 million (+37.1%) to $1,223 million. The price of jet fuel rose from an average of US$72 per barrel in the same period last year to US$87 per barrel. Excluding fuel costs, group expenditure increased 1.3% (+$25 million), at a slower pace than overall capacity growth of about 4%. This reflects the ongoing efforts toward improved cost management, efficiency and productivity.

The group earned a net profit attributable to equity holders of $575 million, an increase of $340 million (+145.1%). This result was boosted by a significant one-off gain of $223 million from the sale of SIA Building in Singapore. The Passenger Airline achieved an operating profit of $190 million (+58.8%). The airline’s result made up 69.2% (+22.1% points) of the group’s operating profit. The operating profit/loss of the three major subsidiary companies are as follows:

• Singapore Airlines Cargo (SIA Cargo): -$5 million (n.m.)
• Singapore Airport Terminal Services (SATS) Group: $48 million (-9.5%)
• SIA Engineering Company (SIAEC): $33 million (+0.3%)

During the quarter, the Passenger Airline carried 4.4 million passengers (+9.4%) – another record for the first quarter. The airline’s carriage of passengers (in revenue passenger kilometres) grew 9.4% while capacity (in available seat kilometres) rose 3.3%. As a result, the passenger load factor improved 4.3 percentage points over the previous year, to 75.6%.

The passenger breakeven load factor rose 2.8 percentage points to 70.8% as unit cost grew at a higher rate (+7.1%) than yield (+2.9%). Excluding fuel, passenger unit cost actually declined 7.0%.

SIA Cargo carried 5.7% more freight (in load tonne kilometres) than the corresponding period last year. As capacity growth (in capacity tonne kilometres) was 4.6%, cargo load factor rose 0.6 percentage point to 61.9%. However, higher fuel costs pushed cargo breakeven load factor to 64.2%, up 4.7 percentage points, as unit cost grew at a higher rate (+12.3%) than yield (+4.1%). SIA Cargo suffered an operating loss of $5 million for the quarter.

There was no change to the Passenger Airline fleet of 90 passenger aircraft during the quarter. As at 30 June 2006, the operating fleet comprised 27 B747-400s, 58 B777s and five A340-500s. From the start of the quarter, the Passenger Airline expanded its network by adding frequencies to Adelaide, Guangzhou, Hong Kong, Taipei, Male, Ho Chi Minh City and Penang.

On 19 July 2006, the Passenger Airline commenced a three-times weekly service to Milan and Barcelona, expanding the passenger route network to 65 gateways in 35 countries.

SIA Cargo leased two B747-400 freighters to Great Wall Airlines during the quarter, thereby reducing its operating fleet to 14 freighters as at 30 June 2006. A new twice-weekly freighter service to Tianjin was launched in May 2006 to tap strong export growth from China.

Great Wall Airlines, SIA Cargo’s China-based joint venture, took to the skies on June 1, operating a six-times-weekly freighter service from Shanghai to Amsterdam. Great Wall Airlines is looking at opportunities to expand its network into other Asian ports in coming months.

For the group, Great Wall Airlines is a significant commitment to directly participate in the further development of China’s air cargo market and facilitate export growth from China to major trading partners around the world.

On 21 July 2006, Singapore Airlines signed a Letter of Intent to purchase 20 Airbus A350 XWB-900s and nine additional Airbus A380-800s, with options on another 20 A350 XWB-900s and six A380-800s. At manufacturer catalogue prices, the value of the 29 aircraft on firm order is US$7.5 billion.

This latest order, together with Singapore Airlines’ order in June for 20 Boeing 787s, will position the airline well for future growth and uphold its policy of continuous fleet renewal and modernisation. 

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