Singapore SIA surprises with strong 3rd quarter gains
Excluding one-time gain from earlier period, net profit is up 51% at $590m
By Gabriel Chen
HIGHER TRAFFIC: SIA’s earnings were lifted by healthy passenger traffic, as the airline carried 4.96 million passengers in its third quarter - 3.5 per cent more than what it recorded in the preceding year. — PHOTO: BLOOMBERG NEWS
SINGAPORE Airlines (SIA) yesterday handsomely beat market expectations with strong third- quarter profits, but it also warned of an uncertain business outlook.
The carrier said the outlook beyond the near term is weighed down by stress in financial markets and growing concerns about a potential United States recession.
SIA also acknowledged yesterday that the price of oil futures points to oil prices holding at current high levels.
However, despite the cautionary outlook, SIA reassured investors that its rising spending on jet fuel will be partially mitigated by hedging and passenger surcharges.
SIA’s net profit for the three months ended Dec 31 last year was $590 million - just above the $589.2 million reaped in the same period a year earlier. But it was almost 30 per cent higher than a $457 million forecast by a Dow Jones Newswires poll of analysts.
Industry watchers say the carrier’s performance was remarkable because the earlier period was inflated by a $199 million one-off gain from selling a stake in associate Singapore Aircraft Leasing Enterprise.
Excluding that exceptional gain, net profit this year would be 50.7 per cent up on the previous period, according to SIA.
SIA’s third-quarter revenue rose to $4.28 billion from $3.79 billion in the corresponding quarter a year ago. Operating profit was 50.7 per cent higher at $674.6 million compared with $447.7 million a year earlier.
Healthy passenger traffic led the group to posting operating profits of $1.65 billion for the first nine months ended Dec 31 last year - up 68.9 per cent on the previous period.
SIA said that it carried 4.96 million passengers in the third quarter, which was 3.5 per cent more than in the preceding year.
Passenger traffic improved 2.7 per cent while capacity gained 2 per cent.
Subsidiary SIA Cargo’s freight traffic for the quarter was down 2.6 per cent year-on-year. This was in line with the decline in cargo capacity of 2.4 per cent, the group said.
SIA’s other subsidiaries - Singapore Airport Terminal Services (Sats) and SIA Engineering Company (SIA Engg) - had mixed quarterly results.
Sats’ operating profit inched up 2 per cent to $47 million, while SIA Engg’s fell 27.9 per cent to $19 million.
Fuel costs, which accounted for 36.9 per cent of the group’s expenditure in the quarter, rose 8 per cent to $1.33 billion.
SIA also gave updates about its fleet and route development.
During the third quarter, SIA took delivery of its first Airbus A380-800 and its 11th Boeing 777-300ER, both of which feature SIA’s newest cabin products.
‘The new cabin and seats on the aircraft have been well received by customers,’ SIA said.
SIA Cargo, it said, also commenced new freighter services from Brussels to Chicago and Los Angeles in November last year.
As at Dec 31 last year, the operating fleet comprised 94 passenger aircraft, with an average age of six years and seven months.
Earnings per share for the quarter rose to 49.8 cents from 47.7 cents, while net asset value per share rose to $12.12 as at Dec 31 last year from $12.11 as at March 31 last year.
SIA shares closed 24 cents higher at $15.64 yesterday. The results came in after the market had closed.
Source : Straits Times - 02 Feb 2008
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