Singapore Airlines reports falling profit, caught in crosswinds

Courtesy Singapore Airlines

Singapore Airlines (SIA) reports a net profit of S$168 million (US$137 million) for its group of companies in the first half of its 2012/13 financial year, down S$71 million or 30 per cent over the same period last year. This was attributed largely to the deepening losses incurred by its cargo subsidiary and higher fuel cost.

Of greater concern is how the second quarter did worse than the first; group profit tumbled 54 per cent. For SIA the airline, it was down 5.6 per cent to S$84 million. The outlook remains bleak in light of the continuing European economic crisis and volatile fuel prices.

SIA may be caught in the budget and premium crosswinds. Regional carrier SilkAir showed improved performance, registering first-half operating profit of S$37 million, up from S$34 million. While the carrier will be increasing frequencies to existing destinations such as Hyderabad, Kochi, Kota Kinabalu, Kunming, Phuket and Thiruvananthapuram, and adding a new destination – Visakhapatnam – to its network, seven of its 16 weekly services to Yangon will be replaced by parent SIA services.

SIA is also keen to grow new budget subsidiary Scoot, which has added Bangkok, Taipei and Tianjin to its network besides Sydney. There is of course also 33-per cent owned Tiger Airways, which may be competing with Scoot on some routes. In a way, selling 60 per cent of Tiger Australia to Virgin Australia may pave the way for the entire Tiger outfit to be sold eventually. (See Singapore Airlines releases Tiger into Virgin’s Lair, Oct 31, 2012)

But SIA’s immediate concern must be the threat posed by the Qantas-Emirates partnership on the kangaroo route. The premium competition will intensify, with at least two key rivals – Qantas and Cathay Pacific – introducing upgraded premium products in the next two years to match a similar SIA’s planned upgrading programme. It will be interesting to see how the competition shapes up.

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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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