SIA's Q2 profit jumps 68% to S$94m on better showing by associates, JVs

Singapore

BETTER showing by associates and joint ventures (JVs) - a key drag previously - led Singapore Airlines to post a 68 per cent jump in net profit for the second quarter to S$94 million from a year ago although higher net finance charges partially offset the plus point.

Share of losses from associated companies more than halved over the period and was mostly from Virgin Australia while the carrier posted a share of profits from JV companies versus a loss a year ago.

On the operational level, SIA's higher expenditure on the back of capacity injection dragged operating profits lower by 8.6 per cent to S$213 million for the three months to September.

The higher expenditure outstripped a 4 per cent revenue growth to S$4.2 billion from S$4.1 billion as passenger traffic grew across the airlines in the group.

Passenger revenue grew 7.5 per cent while cargo revenue declined 16.3 per cent from a year ago due to a drop in airfreight demand amid US-China trade tensions, and exports slowdown in key manufacturing countries in Europe and Asia.

Non-fuel expenditure rose 6 per cent on capacity increase while net fuel cost was higher by 1.7 per cent primarily due to an increase in fuel volume consumed on capacity growth.

Operating performance across the companies in the group was mixed with the parent airline firm and SilkAir's profitability largely unchanged.

Operating profit for the parent airline company fell 1.7 per cent to S$233 million as revenue and expenditure were higher by similar magnitudes.

Similarly, SilkAir's higher revenue, largely from traffic growth was matched by an increase in expenditure - this was partly contributed by the 737 MAX 8 grounding - with operating loss staying flat at S$3 million against last year.

Scoot's operating loss widened to S$39 million from S$11 million as higher costs offset higher passenger revenue on the back of capacity growth.

SIA Engineering held up well with a 73 per cent jump in operating profit to S$19 million for Q2 due to higher revenue from the airframe and line maintenance segment, lower subcontract costs and a favourable exchange variance. This was, however, partly offset by lower revenue from the engine and component segment.

The group's earnings per share rose accordingly to eight Singapore cents from 4.8 Singapore cents.

SIA Group declared an interim dividend of eight Singapore cents per share, same as the previous corresponding period, to be paid on Nov 27.

For the first half year, the group's net profit improved 5.1 per cent to S$206 million on the back of a 5.3 per cent rise in revenue to S$8.3 billion.

Passenger flown revenue was up 8.2 per cent, lifted by 7.6 per cent growth in traffic.

Load factor improved 1.0 percentage point to 84.6 per cent - a record for the first half.

Notwithstanding the significant capacity expansion, RASK (revenue per available seat-kilometre) continued to click higher, improving 1.3 per cent to 7.7 Singapore cents for the first half - the highest since the commencement of the group's transformation programme.

However, cargo flown revenue declined by 12.5 per cent due to weaker yields and lower loads carried.

The carrier said it expects passenger bookings in the coming months to be stronger year-on-year, with yields supported by premium cabin traffic.

However, it warned that headwinds persist in the form of intensifying competition in key operating markets, as well as an uncertain global economic outlook with cargo demand likely to remain weak amid ongoing trade tensions and a manufacturing slowdown.

It also added that fuel prices are expected to remain volatile, as a result of geopolitical and economic risks.

SIA shares fell four Singapore cents or 0.4 per cent to finish at S$9.43 on Tuesday, underperforming the stock market's key Straits Times Index's gains of 0.4 per cent.