by winston » Tue May 13, 2008 11:23 pm
Singapore Air Profit Falls on Lack of One-Time Gains (Update2)
By Chan Sue Ling
May 13 (Bloomberg) -- Singapore Airlines Ltd., the world's second-largest carrier by market value, reported a 21 percent decline in fourth-quarter profit as a one-time gain a year earlier masked contributions from higher passenger traffic.
Net income fell to S$527.5 million ($385 million) in the quarter ended March 31 from S$671.3 million a year earlier, the company said in a statement today. Operating profit, or sales minus the cost of goods sold and administrative expenses, rose 40 percent. Sales increased 12 percent to S$4.11 billion.
Singapore Air posted its highest annual operating income in at least 18 years and carried a record number of passengers after Chief Executive Chew Choon Seng introduced the Airbus SAS A380 superjumbo. The airline's advantage as the first operator of the world's largest commercial jet helped it to raise fares to cushion rising fuel costs.
``Singapore Air has always been able to match capacity to demand and the A380 has helped them,'' said Steven Lim, who helps manage about $300 million at Daiwa SB Investments in Singapore. ``But this year, it will be difficult for them to repeat what they have achieved because they are operating in a slower growth environment. This year will be tough.''
Airlines globally may post a combined profit of $4.5 billion this year on higher fuel costs and a slowing U.S. economy, the International Air Transport Association said April 1. That's 20 percent lower than the $5.6 billion earned in 2007, according to the Geneva-based group.
Fuel Costs
``Jet fuel prices, in step with crude oil prices, look set to stay well above $100 per barrel this year,'' the carrier said in a statement today. ``The combination of a global economic slowdown and record high fuel prices will make this a more challenging year for airlines.''
Singapore Air, which hedges part of its fuel requirements and imposes a ticket levy to help counter the higher costs, spent S$1.29 billion on fuel in the quarter, 14 percent more than the year earlier. Fuel accounted for 35 percent of total costs in the three months.
Jet kerosene prices reached a record $160.25 a barrel yesterday, topping five consecutive quarters of gains, according to Bloomberg data.
``This is not a good time for airlines,'' said Winson Fong, who manages about $600 million at SG Asset Management in Hong Kong. ``We haven't seen the worst of the global economic slowdown, while costs have gone up.''
Singapore Air added 0.6 percent to S$15.76 as of 5:05 p.m. close of trading in the city-state today. The earnings were released after the market closed.
Full-Year, Dividend
The carrier posted a net profit of S$2.05 billion for the 12 months ended March, a 3.7 percent slide from the year before. Operating profit climbed to S$2.12 billion, the highest in at least 18 years, according to Bloomberg data.
Profit in the year before included S$667.7 million of one- time gains from the sale of assets, a stake in an aircraft leasing company and write-back of tax provisions.
Singapore Air carried a record 19.1 million passengers last fiscal year, 4.2 percent more than the year before. Full-year passenger yield, or average revenue per seat, climbed to 12.1 cents per kilometer from 10.9 cents.
The carrier filled 80.3 percent of seats last year compared with 79.2 percent a year earlier.
The company plans to pay a final dividend of 80 cents a share, taking the total payout for the year to S$1.
Superjumbo
Meanwhile, Singapore Air said today it may be affected after Airbus said it will deliver fewer A380s for three years.
``We are now waiting to hear from them in detail about what the changes to their production schedule mean for deliveries of our aircraft down the line,'' Stephen Forshaw, a Singapore Airlines spokesman, said in an e-mailed response to questions.
The airline began services with the double-decker A380 in October and now flies its three aircraft to London and Sydney. The fourth will fly to Tokyo and the fifth will arrive by early July, the carrier has said. First-class travel in the aircraft, fitted with suites and double beds, are 20 percent more expensive than other planes in its fleet.
To sustain profits, Singapore Air, is introducing all business-class flights to Los Angeles and Newark, New Jersey. The 18-hour flight will have 100 business-class seats from mid-May. Singapore Air gets 40 percent of its revenue from business-class travelers.
Singapore Air will temporarily fly the double-decker A380 on one of its three daily flights to Beijing in early August due to demand ahead of Olympic Games.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"