SIA group boosts first-half profits despite a revenue drop and varying subsidiary results
THE SIA group made an operating profit of S$240 million in the first half of the 2015-16 financial year, S$69 million higher (+40.4 per cent) than last year. LCC subsidiaries Scoot and Tiger Airways plus theCargo division all impacted performance while lower fuel costs helped overall performance.
Group revenue declined S$345 million to S$7,242 million (-4.5 per cent). Passenger flown revenue fell S$204 million or 3.5 per cent, mainly attributable to lower flown revenue from the parent airline company, as passenger carriage and yield declined against the same period last year. Cargo and mail revenue recorded a S$87 million decline (-7.9 per cent), as both load factor and yield suffered from overcapacity in the market. Engineering services revenue fell S$53 million (-22.5 per cent) on the back of reduced overhaul activities.
Income earned upon the release of seven A350-900 delivery slots originally planned for FY2017-18 and FY2018-19 was offset by a fall in other incidental revenue. Group expenditure fell S$424 million to S$6,992 million (-5.7 per cent), on the back of a S$458 million reduction (-16.3 per cent) in net fuel expenditure. Average jet fuel price was 41.1 per cent lower than one year ago, providing S$1,158 million in cost savings. This was partially offset by the strengthening of the US dollar against the Singapore dollar (+S$142 million). As a result, group fuel cost before hedging declined S$1,015 million or 36.1 per cent. The reduction was partly eroded by a S$545 million hedging loss (+S$557 million), resulting from 57 per cent of the group’s fuel requirement for the half year being hedged at a weighted average price of US$106 per barrel. Ex-fuel costs were up S$34 million or 0.7 per cent from last year, partly attributable to SilkAir’s and Scoot’s expansion.
First half net profit The group posted a net profit of S$305 million, an increase of S$179 million from the same period last year.
The group’s share of losses of associated companies declined by S$117 million, mainly due to the reclassification of Tiger Airways as a subsidiary company. In addition, higher dividends were received from long term investments (+S$98 million). These were partially offset by lower gains on disposal of aircraft (-S$57 million), tax expense compared to a credit last year (-S$49 million) and weaker share of results of joint ventures (-S$28 million).
The operating results of the main companies in the group for the first half of the financial year were as follows:
Operating profit for the parent airline company increased by S$23 million to S$206 million in the first half of the financial year. Total revenue declined by S$324 million, largely attributable to a S$278 million reduction in passenger flown revenue stemming from a 1.7 per cent fall in passenger carriage and a 3.7 per cent drop in passenger yield. Bellyhold revenue from SIA Cargo reduced by S$58 million. Other revenue was also lower, but was mitigated by income earned upon the release of seven aircraft delivery slots. Expenditure was down S$347 million, with S$387 million in savings from a reduction in net fuel costs, partially offset by higher aircraft maintenance and overhaul costs.
SIA Engineering’s operating profit was S$11 million higher compared to last year. A S$36 million reduction in revenue due to reduced airframe and component overhaul activities was more than compensated by a S$47 million drop in expenditure that largely arose from lower subcontract, material and staff costs.
SilkAir registered an operating profit of S$26 million, S$21 million up from the same period last year. Total revenue increased S$39 million as passenger flown revenue was boosted (+S$43 million) by 11.1 per cent growth in passenger carriage and a 0.8 per cent lift in passenger yield. Total expenditure increased by S$18 million, mainly as a result of expanded capacity (+8.5 per cent).
SIA Cargo narrowed its operating loss significantly from S$34 million to S$12 million. Cargo yield declined by 8.5 per cent largely due to lower fuel surcharges, while freight carriage was flat, resulting in lower revenue (-S$86 million). However, this was more than offset by a S$108 million reduction in expenditure, mainly from lower fuel costs.
Scoot’s operating loss was halved in the first half of the financial year. Traffic grew 14.1 per cent on the back of 10.1 per cent capacity expansion; coupled with a 1.9 per cent lift in yield, passenger revenue improved 15.4 pre cent. Expenditure rose 1.2 per cent from higher capacity, partly negated by lower fuel costs.
Tiger Airways, which became a subsidiary of the Group in October 2014, recorded an operating loss of S$10 million in the first half, which was attributable to a loss in the second quarter.
Second Quarter 2015-16 Group operating profit for the second quarter was S$129 million, almost flat (-S$3 million or -2.3 per cent) against last year. Group revenue fell S$60 million compared to a S$57 million decline in expenditure.
The operating results of the main companies in the Group for the second quarter of the financial year were as follows:
All the main companies in the Group reported improved operating results, except for the parent airline. Operating profit for the parent airline company decreased by S$40 million to S$98 million in the second quarter of the financial year.
Total revenue declined S$225 million, attributable to a S$124 million reduction in passenger flown revenue stemming from a 4.6 per cent drop in passenger yield, and lower bellyhold and other incidental revenue. Expenditure was down S$185 million, with S$232 million in savings from a reduction in net fuel costs, partially offset by higher aircraft lease rentals, costs related to premium economy installation and aircraft maintenance and overhaul costs.
Group net profit was S$214 million, improving S$123 million from the second quarter last year. This was primarily due to an absence of share of loss from associated companies (+S$105 million) with the reclassification of Tiger Airways as a subsidiary, and higher dividends from long-term investments (+S$88 million), partially offset by a loss on disposal of aircraft, spares and spare engines versus a gain last year (-S$46 million), and tax expense compared to a tax credit last year (-S$36 million).
First half operating performance
The parent airline company’s passenger load factor edged up by 0.2 percentage points to 80.0 per cent during the first half of the financial year. Passenger carriage (in revenue passenger kilometres) fell 1.7 per cent, slightly trailing the 2.0 per cent decline in capacity (in available seat-kilometres). SilkAir’s passenger carriage grew 11.1 per cent, on the back of its 8.5 per cent capacity injection. Consequently, passenger load factor increased 1.6 percentage points to 71.3 per cent.
Scoot reported a passenger load factor of 83.1 per cent, 3.0 percentage points higher than last year. Capacity expanded by 10.1 per cent and was outpaced by 14.1 per cent growth in passenger carriage.
Tiger Airways’ passenger carriage dropped 3.9 per cent, against a 4.1 per cent reduction in capacity. As a result, passenger load factor increased by 0.2 percentage points to 83.8 per cent.
SIA Cargo’s freight carriage (in load tonne-kilometres) was almost flat (+0.1 per cent) year-on-year, while capacity grew by 2.6 per cent. Consequently, load factor fell 1.5 percentage points to 60.7 per cent.
Fleet development During the July-September quarter, the parent airline company took delivery of two A330-300s and one 777-300ER. One of the A330-300s subsequently entered into service in October, while the 777-300ER will join the operating fleet later in November. Two A330-300s were decommissioned in preparation for lease return. As at 30 September 2015, the operating fleet of the parent airline company comprised 104 passenger aircraft - 55 777s, 30 A330-300s and 19 A380-800s, with an average age of seven years and four months.
SilkAir took delivery of two 737-800s and decommissioned one A320-200 in preparation for return to its lessor during the quarter. As at 30 September 2015, SilkAir operated 29 aircraft – 11 A320-200s, five A319-100s and 13 737-800s, with an average age of three years and 11 months.
In the second quarter, Scoot took delivery of two 787-8s and decommissioned one 777-200 in preparation for sale. As at 30 September 2015, Scoot’s operating fleet consisted of one 777-200 and seven 787s, including five 787-9s and two 787-8s, with an average age of two years and seven months.
Tiger Airways returned one surplus A319-100 to the operating fleet, and decommissioned one A320-200 for sale during the quarter. As at 30 September 2015, Tiger Airways operated 24 aircraft – 22 A320-200s and two A319-100s, with an average age of four years and six months.
The size of SIA Cargo’s fleet, comprising eight 747-400 freighters, remained unchanged in the second quarter.
Singapore Airlines has signed an agreement with Airbus to be the launch customer for a new ultra-long-range variant of the A350-900 aircraft (A350-900ULR), which will be capable of flying non-stop between Singapore and the United States. The new agreement upgrades seven of the 63 A350-900s on firm order to A350-900ULRs, and converts four of the 20 purchase options to firm A350-900 orders. The A350-900ULR aircraft will be fitted with all-new cabins/products that are currently under development, and are scheduled to be delivered in 2018. This will enable the re-launch of the world’s longest non-stop flights, between Singapore and both Los Angeles and New York. Non-stop flights to additional points in the US are under consideration.
Route development
For the Northern Winter 2015 operating season (25 October 2015 – 26 March 2016), the parent airline company will mount supplementary services to various points including Adelaide, Ahmedabad, Brisbane, Christchurch, Melbourne, Sapporo and Sydney to cater to demand during the year-end peak. SilkAir commenced services to Male from 26 October 2015.
Scoot has taken over Hangzhou services from SilkAir, commencing four-times-weekly flights to the city from 25 October 2015. It also launched services to Melbourne on 1 November 2015. Subject to regulatory approvals, Scoot will operate thrice-weekly non-stop services to Jeddah from 1 May 2016, taking over from the parent airline company.
Tiger Airways started three-times-weekly services to Quanzhou, China on 28 September 2015. New services to Lucknow, India and a return of service to Lijiang, China are planned for the third quarter of the financial year.
The Group’s network now consists of 120 destinations across 35 countries, including Singapore. SIA Cargo will increase frequency to points in the Americas, Europe, South West Pacific and North Asia in the third quarter to meet higher demand during the year-end peak period. Outlook
Uncertainty in economic conditions persists, exacerbated by concerns about China’s slowing economy that have led to weakening emerging-market currencies and volatility in stock markets. The outlook for both passenger and cargo traffic is cautious. Yields remain under pressure in the face of capacity additions from other airlines. Advance passenger bookings for the October-December quarter are positive, but mainly bolstered by promotional activities.
Fuel prices remain range-bound. For the second half of the financial year, the group is 50.7 per cent hedged at a weighted average price of US$93 per barrel. A rising US dollar will put pressure on operating costs.
Faced with these challenges, the Group will maintain strict cost discipline and will leverage the various airlines in the portfolio to remain flexible and nimble in tapping all key market segments.
SIA group boosts first-half profits despite a revenue drop and varying subsidiary results
THE SIA group made an operating profit of S$240 million in the first half of the 2015-16 financial year, S$69 million higher (+40.4 per cent) than last year. LCC subsidiaries Scoot and Tiger Airways plus theCargo division all impacted performance while lower fuel costs helped overall performance.
Group revenue declined S$345 million to S$7,242 million (-4.5 per cent). Passenger flown revenue fell S$204 million or 3.5 per cent, mainly attributable to lower flown revenue from the parent airline company, as passenger carriage and yield declined against the same period last year. Cargo and mail revenue recorded a S$87 million decline (-7.9 per cent), as both load factor and yield suffered from overcapacity in the market. Engineering services revenue fell S$53 million (-22.5 per cent) on the back of reduced overhaul activities.
Income earned upon the release of seven A350-900 delivery slots originally planned for FY2017-18 and FY2018-19 was offset by a fall in other incidental revenue. Group expenditure fell S$424 million to S$6,992 million (-5.7 per cent), on the back of a S$458 million reduction (-16.3 per cent) in net fuel expenditure. Average jet fuel price was 41.1 per cent lower than one year ago, providing S$1,158 million in cost savings. This was partially offset by the strengthening of the US dollar against the Singapore dollar (+S$142 million). As a result, group fuel cost before hedging declined S$1,015 million or 36.1 per cent. The reduction was partly eroded by a S$545 million hedging loss (+S$557 million), resulting from 57 per cent of the group’s fuel requirement for the half year being hedged at a weighted average price of US$106 per barrel. Ex-fuel costs were up S$34 million or 0.7 per cent from last year, partly attributable to SilkAir’s and Scoot’s expansion.
First half net profit The group posted a net profit of S$305 million, an increase of S$179 million from the same period last year.
The group’s share of losses of associated companies declined by S$117 million, mainly due to the reclassification of Tiger Airways as a subsidiary company. In addition, higher dividends were received from long term investments (+S$98 million). These were partially offset by lower gains on disposal of aircraft (-S$57 million), tax expense compared to a credit last year (-S$49 million) and weaker share of results of joint ventures (-S$28 million).
The operating results of the main companies in the group for the first half of the financial year were as follows:
Operating profit for the parent airline company increased by S$23 million to S$206 million in the first half of the financial year. Total revenue declined by S$324 million, largely attributable to a S$278 million reduction in passenger flown revenue stemming from a 1.7 per cent fall in passenger carriage and a 3.7 per cent drop in passenger yield. Bellyhold revenue from SIA Cargo reduced by S$58 million. Other revenue was also lower, but was mitigated by income earned upon the release of seven aircraft delivery slots. Expenditure was down S$347 million, with S$387 million in savings from a reduction in net fuel costs, partially offset by higher aircraft maintenance and overhaul costs.
SIA Engineering’s operating profit was S$11 million higher compared to last year. A S$36 million reduction in revenue due to reduced airframe and component overhaul activities was more than compensated by a S$47 million drop in expenditure that largely arose from lower subcontract, material and staff costs.
SilkAir registered an operating profit of S$26 million, S$21 million up from the same period last year. Total revenue increased S$39 million as passenger flown revenue was boosted (+S$43 million) by 11.1 per cent growth in passenger carriage and a 0.8 per cent lift in passenger yield. Total expenditure increased by S$18 million, mainly as a result of expanded capacity (+8.5 per cent).
SIA Cargo narrowed its operating loss significantly from S$34 million to S$12 million. Cargo yield declined by 8.5 per cent largely due to lower fuel surcharges, while freight carriage was flat, resulting in lower revenue (-S$86 million). However, this was more than offset by a S$108 million reduction in expenditure, mainly from lower fuel costs.
Scoot’s operating loss was halved in the first half of the financial year. Traffic grew 14.1 per cent on the back of 10.1 per cent capacity expansion; coupled with a 1.9 per cent lift in yield, passenger revenue improved 15.4 pre cent. Expenditure rose 1.2 per cent from higher capacity, partly negated by lower fuel costs.
Tiger Airways, which became a subsidiary of the Group in October 2014, recorded an operating loss of S$10 million in the first half, which was attributable to a loss in the second quarter.
Second Quarter 2015-16 Group operating profit for the second quarter was S$129 million, almost flat (-S$3 million or -2.3 per cent) against last year. Group revenue fell S$60 million compared to a S$57 million decline in expenditure.
The operating results of the main companies in the Group for the second quarter of the financial year were as follows:
All the main companies in the Group reported improved operating results, except for the parent airline. Operating profit for the parent airline company decreased by S$40 million to S$98 million in the second quarter of the financial year.
Total revenue declined S$225 million, attributable to a S$124 million reduction in passenger flown revenue stemming from a 4.6 per cent drop in passenger yield, and lower bellyhold and other incidental revenue. Expenditure was down S$185 million, with S$232 million in savings from a reduction in net fuel costs, partially offset by higher aircraft lease rentals, costs related to premium economy installation and aircraft maintenance and overhaul costs.
Group net profit was S$214 million, improving S$123 million from the second quarter last year. This was primarily due to an absence of share of loss from associated companies (+S$105 million) with the reclassification of Tiger Airways as a subsidiary, and higher dividends from long-term investments (+S$88 million), partially offset by a loss on disposal of aircraft, spares and spare engines versus a gain last year (-S$46 million), and tax expense compared to a tax credit last year (-S$36 million).
First half operating performance
The parent airline company’s passenger load factor edged up by 0.2 percentage points to 80.0 per cent during the first half of the financial year. Passenger carriage (in revenue passenger kilometres) fell 1.7 per cent, slightly trailing the 2.0 per cent decline in capacity (in available seat-kilometres). SilkAir’s passenger carriage grew 11.1 per cent, on the back of its 8.5 per cent capacity injection. Consequently, passenger load factor increased 1.6 percentage points to 71.3 per cent.
Scoot reported a passenger load factor of 83.1 per cent, 3.0 percentage points higher than last year. Capacity expanded by 10.1 per cent and was outpaced by 14.1 per cent growth in passenger carriage.
Tiger Airways’ passenger carriage dropped 3.9 per cent, against a 4.1 per cent reduction in capacity. As a result, passenger load factor increased by 0.2 percentage points to 83.8 per cent.
SIA Cargo’s freight carriage (in load tonne-kilometres) was almost flat (+0.1 per cent) year-on-year, while capacity grew by 2.6 per cent. Consequently, load factor fell 1.5 percentage points to 60.7 per cent.
Fleet development During the July-September quarter, the parent airline company took delivery of two A330-300s and one 777-300ER. One of the A330-300s subsequently entered into service in October, while the 777-300ER will join the operating fleet later in November. Two A330-300s were decommissioned in preparation for lease return. As at 30 September 2015, the operating fleet of the parent airline company comprised 104 passenger aircraft - 55 777s, 30 A330-300s and 19 A380-800s, with an average age of seven years and four months.
SilkAir took delivery of two 737-800s and decommissioned one A320-200 in preparation for return to its lessor during the quarter. As at 30 September 2015, SilkAir operated 29 aircraft – 11 A320-200s, five A319-100s and 13 737-800s, with an average age of three years and 11 months.
In the second quarter, Scoot took delivery of two 787-8s and decommissioned one 777-200 in preparation for sale. As at 30 September 2015, Scoot’s operating fleet consisted of one 777-200 and seven 787s, including five 787-9s and two 787-8s, with an average age of two years and seven months.
Tiger Airways returned one surplus A319-100 to the operating fleet, and decommissioned one A320-200 for sale during the quarter. As at 30 September 2015, Tiger Airways operated 24 aircraft – 22 A320-200s and two A319-100s, with an average age of four years and six months.
The size of SIA Cargo’s fleet, comprising eight 747-400 freighters, remained unchanged in the second quarter.
Singapore Airlines has signed an agreement with Airbus to be the launch customer for a new ultra-long-range variant of the A350-900 aircraft (A350-900ULR), which will be capable of flying non-stop between Singapore and the United States. The new agreement upgrades seven of the 63 A350-900s on firm order to A350-900ULRs, and converts four of the 20 purchase options to firm A350-900 orders. The A350-900ULR aircraft will be fitted with all-new cabins/products that are currently under development, and are scheduled to be delivered in 2018. This will enable the re-launch of the world’s longest non-stop flights, between Singapore and both Los Angeles and New York. Non-stop flights to additional points in the US are under consideration.
Route development
For the Northern Winter 2015 operating season (25 October 2015 – 26 March 2016), the parent airline company will mount supplementary services to various points including Adelaide, Ahmedabad, Brisbane, Christchurch, Melbourne, Sapporo and Sydney to cater to demand during the year-end peak. SilkAir commenced services to Male from 26 October 2015.
Scoot has taken over Hangzhou services from SilkAir, commencing four-times-weekly flights to the city from 25 October 2015. It also launched services to Melbourne on 1 November 2015. Subject to regulatory approvals, Scoot will operate thrice-weekly non-stop services to Jeddah from 1 May 2016, taking over from the parent airline company.
Tiger Airways started three-times-weekly services to Quanzhou, China on 28 September 2015. New services to Lucknow, India and a return of service to Lijiang, China are planned for the third quarter of the financial year.
The Group’s network now consists of 120 destinations across 35 countries, including Singapore. SIA Cargo will increase frequency to points in the Americas, Europe, South West Pacific and North Asia in the third quarter to meet higher demand during the year-end peak period. Outlook
Uncertainty in economic conditions persists, exacerbated by concerns about China’s slowing economy that have led to weakening emerging-market currencies and volatility in stock markets. The outlook for both passenger and cargo traffic is cautious. Yields remain under pressure in the face of capacity additions from other airlines. Advance passenger bookings for the October-December quarter are positive, but mainly bolstered by promotional activities.
Fuel prices remain range-bound. For the second half of the financial year, the group is 50.7 per cent hedged at a weighted average price of US$93 per barrel. A rising US dollar will put pressure on operating costs.
Faced with these challenges, the Group will maintain strict cost discipline and will leverage the various airlines in the portfolio to remain flexible and nimble in tapping all key market segments.
