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SIA Sinks into Net Loss in 4QFY2012 on Higher Fuel

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by Ernie B. Calucag

Singapore Airlines (SIA), the world’s second largest carrier by market value, posted an unexpected loss for its fiscal fourth quarter, hurt by weak travel demand and high jet fuel prices.

The national carrier reported a fourth quarter loss of S$38.2 million compared to a net profit of S$171.0 million in the same quarter a year ago. It was the airline’s first loss since the second quarter of its 2009-2010 financial year.

Despite high fuel prices and ongoing global economic uncertainty, group revenue for the quarter rose 3 per cent to S$3.7 billion year-on-year.

For the full year, SIA posted a significant decline of 69 per cent in net profit to S$336.0 million from a net profit of S$1.09 billion in the previous year.

Group revenue for the same year, however, rose 2 per cent to S$14.8 billion.

In its filing to the Singapore Exchange, the airline said the higher revenue came on the back of a 3.6-per cent improvement in passenger carriage.

Looking ahead, SIA said advance bookings for the coming quarter are higher year-on-year, but that was off a low base due to last year’s post-Japanese earthquake period.

“Promotional activities necessitated by intense competition amongst airlines are expected to place downward pressure on passenger yields, especially in Europe and the United States,” it said in a statement.

“Fuel prices are expected to remain at high levels, which will adversely impact the group’s operating performance,” SIA added.

SIA’s net profit have been declining over the past 15 months as weak travel demand, particularly among bankers and executives, and persistently high jet fuel prices hit margins.

The airline responded by asking its pilots to volunteer for a no-pay-leave of up to two years to save costs and cut its cargo capacity by 20 per cent due to persistent weakness in demand.

Its shares have risen 4 per cent so far this year, underperforming the 10 per cent gain in the broader Singapore Straits Times Index.

On Wednesday, SIA’s shares closed unchanged at S$10.59 each.