Third Quarter Profit Down 43% at Singapore Airlines

The Singapore Airlines Group has reported a net profit attributable to equity holders of $337 million for the third quarter (October – December 2008) of financial year 2008-09, a drop of 42.8% or $253 million from the same period a year ago.

Group revenue declined 2.6% to $4,164 million on weaker passenger and cargo carriage, while Group expenditure rose 5.7% to $3,807 million.

The price of jet fuel corrected from its peak of US$171/BBL recorded in July 2008, averaging US$99/BBL in the third quarter. While lower fuel prices reduced expenditure on fuel by $125 million, losses in hedging amounted to $341 million.

Excluding fuel, Group expenditure was $125 million (-5.5%) lower compared to the same period last year. Foreign exchange rate movements lowered operating profit by $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.

Group operating profit was $357 million for the third quarter, $318 million (-47.1%) lower than the year before. Operating profit for the Parent Airline Company at $314 million was $199 million (-38.7%) lower year-on-year.

The operating results of the group's major subsidiary companies are:

• SATS Group Profit of $ 43 million (-7.7%)
• SIA Engineering Profit of $ 29 million (+53.9%)
• SilkAir Profit of $ 12 million (-17.2%)
• SIA Cargo Loss of $ 46 million (profit of $73 million previously)

April – December 2008

For the nine months to December 2008, the Group posted a net profit attributable to equity holders of $1,020 million, compared to $1,522 million for the corresponding period last year, a decline of $502 million (-33%).

Group revenue grew $810 million (+6.8%) to $12,675 million while expenditure was up by a higher amount to $11,743 million (+$1,535 million or +15%) principally on account of higher expenditure on fuel. The average jet fuel price for the April to December 2008 period increased 44.8% from US$94/BBL to US137/BBL, resulting in fuel expenditure to be higher by $1,462 million.

Consequently, operating profit for the Group fell $725 million (-43.8%)
to $932 million.

A total of 4.8 million passengers flew on Singapore Airlines in the third quarter; 4.2% lower than last year. Passenger carriage (in revenue passenger kilometres) was 1.2% lower while capacity (in available seat-kilometres) grew 2.3%.

Consequently, passenger load factor declined 2.8 percentage points to 78.5%.

Passenger breakeven load factor increased 5 percentage points to 72.7%, as yield grew at a slower pace (+3.2%) than unit cost (+10.7%).

SIA Cargo carried 14.2% less freight (in load tonne-kilometres) than the corresponding period last year. With capacity decreasing at a slower rate (-7.5% in capacity tonne-kilometres), cargo load factor fell 4.5 percentage points to 58.4%. Cargo breakeven load factor increased 5.5 percentage points to 63.4%, from higher unit cost (+3.4%) and weaker yield (-5.7%).

There was no change to the Parent Airline Company’s fleet of 101 aircraft during the quarter. As at 31 December 2008, the operating fleet comprised 14 B747-400s, 76 B777s, five A340-500s and six A380-800s, with an average age of six years and five months.

A four-times weekly service to Riyadh via Dubai was launched on 14 December 2008 and flights to Kuwait via Abu Dhabi will commence from 15 March 2009. More flights to Dubai, Abu Dhabi, Cairo and Istanbul were added.

On the other hand, flights to Manchester, Athens, Osaka, Seoul, Chennai, Bangalore, Penang and Ho Chi Minh City were scaled back during the quarter. From February 2009, services to Amritsar have been suspended.

Demand for air transportation is expected to remain weak for much of 2009. The fuel hedging gains for the first nine months of financial year 2008-09 was $191 million. For January to March 2009, 44% of fuel requirements for the Group, or approximately 3.7 million barrels, have been hedged at average jet fuel price of US$131/BBL.

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