Singapore Airlines improves bottom-line, Tiger Airways reduces loss: Too early to celebrate

SINGAPORE AIRLINES (SIA) posts an operating profit of S$85 million (US$68 million) in the first quarter (Apr-Jun) of its 2012/13 financial year, against a loss of S$36 million last year.

This was the result of increased passenger carriage by 9.6 per cent – the traffic growth outpacing capacity growth of 4.3 per cent – although yields declined by three per cent. The passenger load factor was 3.9 percentage points higher at 9.6 per cent.

Things are looking up for the SIA, which was once billed as the world’s most profitable airline. So it seems. But the outlook continues to be one of uncertainty in light of the sluggish global economy, particularly in Europe and the United States, which affect SIA more than regional carriers. The Q1 result shows the need to continue managing capacity in the near future.

The relatively flat performance of subsidiaries SIA Engineering and SilkAir, as well as the loss incurred by SIA Cargo shows it is not quite the time to celebrate. SIA Engineering’s operating profit for Q1 was S$34 million, compared to $35 million in 2011. SilkAir’s operating profit dipped 14 per cent from S$21 million to S$18 million. SIA Cargo’s loss deepened from S$14 million to S$49 million.

As a Group, operating profit improved from S$11 million to S$72 million.

Meanwhile, budget carrier Tiger Airways in which SIA has a 32.84-per-cent stake reported a reduced loss of S$14 million for the same quarter, from S$21 million last year. The better result came on the back of improved loads and better aircraft utilisation. Tiger Singapore posted an operating profit of S$4 million while it is expected that Tiger Australia’s performance will continue to improve following the lift of the ban by Australian regulators over safety concerns. Tiger has also staked its fortunes in two joint ventures – one with Indonesia’s Mandala Airlines and the other with South East Asian Airlines (SEAAir) in the Philippines.

Certainly it looks promising. But it too may be too early to celebrate, considering how the regional budget competition continues to intensify with the entry of more players. We can expect Tiger’s immediate goal to be recapturing its lost market. SIA itself has launched a new budget carrier – Scoot – operating to Australia and China.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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