Singapore Airlines

[redcorolla95]

Changi Airport is a much better business than the airlines they serve. Check out their financial statements.

[kazukirai]

I don't understand. Can you please elaborate? I can't see why is SIA going into LCC-LH based on the article?

This is the crux of the article. I can't say why 'long haul' but if the article and paper quoted in the article provides any meaningful reason, Low Cost would help SIA play better defence (to use sporting analogy).

Adjusted for the average flight distance, legacy carrier costs have remained 30%-60% higher than the LCCs for nearly all of the deregulation era, averaging about 40% higher in the last decade.
While the cost differential between LCCs and non-LCCs has remained large, the average price differential has been shrinking. LCC fares have declined much less than those of legacy carriers in the 2000s, reflecting in part their lower burden of excess aircraft capacity. This is no doubt a large part of the reason that LCCs have suffered much milder losses in the 2000s.

I also recall them reporting that loads have come down to 60+% recently right? Maybe their business analysts see dark clouds for the industry or some other reasons based on the data they have access to.

Anyhow, I found an analysis on their annoucement. For all buddies' reading pleasure. (here)

[dydx]

I am a little shocked by SIA's Q1 (ended 30Jun11) results....
http://info.sgx.com/webcoranncatth.nsf/V...B0033FDD8/$file/sgxann-q1fy1112.pdf?openelement [Q1 results announcement]
http://info.sgx.com/webcoranncatth.nsf/V...B0033FDD8/$file/nr-q1fy1112.pdf?openelement [Press release]

Just higher fuel cost alone could push the main airline operation into an operating loss! Quite clearly, SIA's business outlook has worsened.

[Musicwhiz]

Business Times - 29 Jul 2011

SIA Q1 profit dives 82% to $45m on high fuel costs

Expenditure on fuel now accounts for over 40% of group's total spending

By NISHA RAMCHANDANI

(SINGAPORE) Hit by high fuel costs, Singapore Airlines (SIA) saw net profit plunge 82 per cent year-on-year to $45 million for the first quarter ended June 30.

Group revenue grew 3 per cent - or $112 million - to $3.578 billion on the back of higher passenger carriage, while group expenditure rose 11 per cent to $3.56 billion.

Earnings per share were 3.7 cents in the quarter versus 21.2 cents in the previous corresponding quarter.

Expenditure on fuel - excluding hedging - rose 38 per cent, or $397 million, as average jet fuel prices surged 46 per cent year-on-year. This was partially offset by a $90 million year-on-year improvement in hedging on gains of $12 million this year versus losses of $78 million last year.

With higher fuel costs outstripping revenue growth, the group recorded an operating profit of $11 million for the first quarter, down from $251 million previously.

The parent airline company chalked up an operating loss of $36 million in the quarter, versus an operating profit of $136 million in the previous corresponding quarter. High fuel costs before hedging led to operating expenditure rising 11 per cent or $298 million, outpacing a 5 per cent or $126 million improvement in revenue.

Meanwhile, SIA Engineering's operating profit for the first quarter was $35 million, versus $36 million in 2010. SilkAir registered an operating profit of $21 million, up from $15 million in 2010, and SIA Cargo suffered an operating loss of $14 million versus an operating profit of $60 million in 2010.

Citing high fuel costs as its biggest challenge in the coming months, SIA highlighted that with jet fuel currently above US$130 per barrel - nearly 50 per cent higher from a year ago - fuel costs account for over 40 per cent of the group's total spending.

'Advance bookings for travel in the next few months are almost flat compared to the same period last year. With the current economic uncertainties, significant challenges remain in the key markets of Europe and the United States,' SIA added. During the quarter, SIA took delivery of one A380-800 and decommissioned three B747-400 aircraft, giving it a fleet of 106 passenger aircraft as at June 30, with an average age of 6 years and 4 months.

The company has also been adjusting capacity on routes to suit demand. For instance, frequency on its Singapore-Los Angeles non-stop service was reduced, while capacity will be added to flights to popular Asian cities such as Hong Kong, Guangzhou, Taipei and Mumbai. Passenger capacity for the financial year is expected to grow 5 per cent.

SIA shares closed at $14.71 yesterday, down six cents.

[Musicwhiz]

Business Times - 03 Aug 2011

Hock Lock Siew
A perfect storm that SIA must navigate out of

By VEN SREENIVASAN

FIGURATIVELY speaking, the market was caught with its pants down last week when Singapore Airlines (SIA) shocked with first-quarter core net profit of just $6 million, versus a consensus bottomline profit estimate of $130-180 million.

Soaring fuel costs and flat yield saw the airline suffer an 82 per cent drop to $45 million in net profit attributable to equity holders, compared to $253 million in the same quarter a year ago. Group revenue grew just 3 per cent to $3.6 billion.

The parent airline company turned in an operating loss of $36 million in the first quarter, in contrast to the operating profit of $136 million in the same quarter of the previous financial year.

As CIMB analyst Raymond Yap (who did get his estimates right) noted, the 'street' had not fully appreciated how weak SIA's yield environment had become, and how weaker loads made it difficult for SIA to recoup higher fuel costs. Not surprisingly, the stock has retraced more than a dollar over the past week and is now trading at a four-month low amid a slew of analyst downgrades.

But SIA is a company which has a knack for surprising naysayers.

Last year, for example, it posted full-year net earnings of $216 million after coming through the first six months with a $466 million loss, and ended the nine-month period with a loss of $62 million.

But this time, things look different. For the first time in its history, the airline is facing a multitude of complex challenges on various fronts.

The liberalisation of aviation regimes around Asia has thrown up numerous competitors to its short-haul services, while the emergence of new cash-rich global airlines - especially in the Middle East - is proving to be a formidable threat to its long-haul business.

The strong Singapore dollar, the injury to the Japan market, and generally weaker North Asian demand has seen yield slipping 2.5 per cent quarter-on-quarter and 0.9 per cent year-on-year, while load factor has slipped 4 per cent from a year ago.

Meanwhile, the disaster in Japan has hit SIA Cargo's operations particularly hard. Together with the anaemic overall global cargo market, this unit posted an operating loss of $14 million.

SIA's fuel bill has risen 48 per cent from a year ago, and now makes up more than 40 per cent of its total expenditure. The company's hedging is at the low end of the 20-60 per cent band, thus delivering a hedging gain of only some $12 million.

But given the competition - especially in coach class - SIA's option for passing on its stubbornly high fuel bill to passengers is a tough proposition. The company has already warned that 'advance bookings for travel in the next few months are almost flat compared to the same period last year'.

But the company is fighting back. Its plans to boost capacity 5 per cent through 2012 via more intensive use of its existing fleet will boost its efficiency. And plans to launch its own long-haul low-cost carrier is a clever attempt to claw back some of the coach class market it has been losing (although the results will show only 3-5 years down the road).

Meanwhile, the challenges are real and imminent.

SIA now controls a third of the seat capacity at Changi; in contrast, Cathay control about half the capacity in Hong Kong, while Emirates has much more than that in Dubai.

Whether SIA can hang on to its market share as the likes of Jetstar (which is setting up a long-haul base in Singapore to supplement an already thriving short- haul business), AirAsia and Tiger Airways grow their total share to beyond 25 per cent remains to be seen.

Given the rapidly evolving competitive landscape, many industry insiders also doubt the airline's ability to maintain its premium pricing for its seats in future.

On the positive side, the airline is still able to fill most of its high-yield premium seats, which account for 40 per cent of its income.

But the fact remains that for a premium carrier like SIA, there has been a significant and permanent paradigm shift in the operating environment.

Brand loyalty is fading. Competition is hotting up on all fronts as aviation regimes are liberalised. Costs remain stubbornly high and continue to rise. Yields are under constant pressure. Cargo demand is anaemic. And economic uncertainties continue to dog sentiment.

If ever there was a perfect storm that SIA had to navigate out of, this surely is it.

[tonylim]

SIA should stop treating Ang Mo like one class above Asians , although all pay the same rate.

[Musicwhiz]

Taken from: http://www.bloomberg.com/news/2011-11-01...scoot.html

Singapore Air Unveils Budget Airline Scoot


Singapore Airlines Ltd. (SIA), the world’s second-largest carrier by market value, unveiled budget long- haul unit Scoot as competition from low-cost carriers lures passengers from its main business.

Flights will begin in mid-2012, and destinations in the first year will include China and Australia, the company said in a statement today. Scoot will be managed independently from its parent, and all pilots will be hired from outside, Chief Executive Officer Campbell Wilson said at a press conference.
In the first year, Scoot will operate four Boeing Co. 777-200 planes purchased from its parent and offer fares up to 40 percent cheaper than full-service carriers. Singapore Air is adding the “no-frills” unit as AirAsia X Sdn. and Qantas Airways Ltd. (QAN)’s Jetstar boost budget long-haul services to tap rising Asian travel demand.

“This is a move that they have to take to prevent losing market share,” said Andrew Orchard, a Hong Kong-based analyst at Royal Bank of Scotland Group Plc. “There are lots of travelers who are price sensitive in Southeast Asia.”

Singapore Air fell 2 percent to S$11.49 at 1:38 p.m. in the city-state. The stock has declined 27 percent in the past year, compared with an 11 percent drop for the Straits Times Index.

India, Europe

Scoot, which will operate from Changi Airport’s terminal 2, will offer two cabins. The airline will eventually expand operations to India, Europe, Africa and Middle East.

The carrier, which has a capital of S$283 million ($224 million), will spend as much as S$60 million in the run-up to the start of its flights, Wilson said. Scoot aims to have about 50 pilots and 250 cabin crew by the end of next year and to operate 14 aircraft by the middle of this decade, he said.

“Taking over routes of SIA is not the intention of Scoot,” Wilson said, when asked about competition with parent Singapore Air. “We’re targeting a new growing market. We are here to bring incremental business to the SIA group.”

Long-haul budget flights are a break from the traditional low-cost model, pursued by Southwest Airlines Co. and Ryanair Holdings Plc (RYA), which focuses on flying single-class, narrowbody planes on routes of less than about five hours.

Global passenger air traffic may rise 4.6 percent next year, led by growth in the Asia-Pacific region, the International Air Transport Association said in September. Airlines in the region may earn $2.3 billion in 2012, compared with a global profit forecast of $4.9 billion, the group said.

Singapore Air also owns regional carrier SilkAir and has agreed to increase its stake in short-haul budget carrier Tiger Airways Holdings Ltd. (TGR) to about 49 percent.

Scoot will seek to leverage its parent’s expertise in fuel and currency hedging, Wilson said.

[Musicwhiz]

The Straits Times
Nov 4, 2011
SIA half-year profits down 62%
Larger fuel bill, flat yields and marginal growth in passenger numbers among factors

By Karamjit Kaur

A SHARP spike in the fuel bill caused a major dent in Singapore Airlines' (SIA) half-year profits, which dived 62 per cent to $239 million.

Fuel spending in the six months from April to September jumped 35 per cent compared with that in the same period a year earlier, adding $747 million to total costs. This took overall expenditure to $7.14 billion, a jump of 10 per cent.

Turnover grew at a slower pace, increasing 3 per cent year-on-year to $7.28 billion, SIA said yesterday.

In the July-September second quarter, profits fell 49 per cent to $194 million.

While fuel was the main culprit, profits were also hit because of flat yields and marginal growth in passenger numbers.

During the six months to end-September, the parent airline carried 8.5 million passengers, a small increase of 3.3 per cent compared with the figure a year earlier.

Industry watchers attributed this to slowing growth in the premium air travel business and SIA losing market share to other full-service airlines as well as budget carriers.

Of the different units within the group, the parent airline and SIA Cargo posted the steepest falls in operating profits in the first half of the financial year, compared with the figures last year.

Regional arm SilkAir and SIA Engineering did better.

At SilkAir, which competes aggressively in the short-haul sector not just with other full-service airlines but also budget carriers, operating profit fell by $2 million to $34 million.

The airline's better performance reflects a general uptrend in the regional air travel market.

In a separate statement yesterday, Changi Airport Group said total flights are expected to increase in the next five months to end-March next year, mainly on the back of airlines adding capacity to regional destinations like Bangkok and Kuala Lumpur.

For SIA, the skies are expected to stay cloudy for some time.

The current economic uncertainty and weak consumer confidence have had an impact on demand, with advance bookings, especially in Europe and the United States, showing signs of weakness, the airline said. Forward prices of jet fuel also remain high, it added.

Given the tough operating conditions, the airline is pinning its hopes on Scoot, a new budget arm that starts flying in the middle of next year to destinations more than five hours' flight time from Changi.

SIA declared an interim dividend of 10 cents per share, which would amount to a $119 million total payout for the half-year.

Earnings per share for the quarter from July to September fell to 16.2 cents, against 31.8 cents a year ago, while net asset value per share

was $10.90 as of Sept 30, down from $11.89 as of March 31.

karam@sph.com.sg

[Musicwhiz]

The Straits Times
Published on Feb 3, 2012
SIA third-quarter profits down 53%

High fuel cost, stagnant passenger and cargo space demand contribute to fall

By Karamjit Kaur

HIGH fuel prices and stagnant demand for both passenger seats and cargo space dragged profits at Singapore Airlines down to $135 million for the three months to end-December.

This is a 53 per cent fall from the same quarter a year earlier.

Between October and December last year, the airline's fuel bill, which accounted for 40 per cent of total spending, rose by 33 per cent or $375 million compared with a year earlier, SIA said yesterday.

Overall, total expenditure for the quarter rose by 12 per cent to $3.72 billion, outpacing the 1 per cent growth in turnover which hit $3.88 billion.

During the same period, total passenger traffic for the parent carrier fell marginally by 0.3 per cent to 4.4 million.

With total capacity, measured in terms of available seat kilometres, up by a higher 3.3 per cent, SIA had a tough time filling seats.

The parent airline as well as its subsidiaries, SilkAir, SIA Cargo and SIA Engineering, all reported a drop in operating profits in the three months compared to the same quarter in 2010.

With two months to go before the close of the current financial year in March, it is not looking good for SIA, industry watchers said.

Collectively, profits for the nine months from April to December fell almost 60 per cent to $374 million.

Earnings per share for the third quarter fell to 11.4 cents, from 24.1 cents a year earlier, while net asset value per share was $10.95 on Dec 31, down from $11.89 on March 31.

Amid uncertainty in the global economy and the protracted euro zone debt crisis, as well as sky-high fuel prices, forward bookings also continue to show signs of weakness, the airline said.

The cargo market also looks bleak due to weak consumer demand in major developed economies.

SIA said: 'Passenger yields are expected to remain under pressure while cargo yields are expected to continue to decline.'

Amid the challenges, the airline will continue to proactively seek out revenue opportunities and watch its costs closely, SIA said. The airline has much riding on Scoot, its new budget subsidiary, which will launch in the middle of the year.

Scoot plans to operate wide-body aircraft on medium- and long-haul flights to take advantage of the boom seen in the low-cost travel segment in the last few years.

But even as challenges loom for global airlines, the long-term prospects for the industry are strong, aviation observers said.

Mr Andrew Herdman, director-general of the Association of Asia Pacific Airlines, said recently that while carriers brace themselves for a tough year ahead, 'Asian airlines still remain optimistic about longer-term growth prospects.'

This is evident by their 'ambitious fleet plans, ongoing service enhancements and the launch of innovative new business ventures', he said.

karam@sph.com.sg

[vicom76]

I noticed SIA has been doing share buyback at current price range.

Anyone has views whether it's a good support price to buy SIA now?