Singapore Air profit lifted to 7-year high

By BLOOMBERG

SINGAPORE • Singapore Airlines Ltd, the carrier that is spending US$850 million (RM3.33 billion) to refit its A380 jets and attract premium passengers, got a boost to its third quarter earnings. That didn’t come from passengers, but from cargo.

South-East Asia’s biggest carrier reported its best quarterly profit in seven years for the quarter through December as a jump in cargo demand from online shoppers and semi-conductor makers boosted earnings.

Scoot, its low-cost unit, also added to the profit growth at the company.

Shares rose as much as 2.7% yesterday, the biggest intraday gain in almost three months.

After revealing a surprise loss less than a year ago as a result of intense competition from Gulf-based and budget operators, the pickup in cargo is coming to the rescue of the carrier that is undergoing an internal review of its operations. The business, which is in the process of re-integrating into the main airline in a bid to improve efficiency, reported a 66% jump in operating profit in the quarter, the most among its divisions.

“This is mainly driven by improving US and European consumption demand as well as inventory re-stocking,” said Corrine Png, CEO of Singapore-based Crucial Perspective Pte Ltd. “Tech and telco-related products, luxury goods and express packages, given the rising e-commerce demand, are fuelling this growth.”

Cargo yield — an indicator of profitability from moving a tonne of goods per kilometre — rose 12% to 30.6 Singapore cents.

The Singapore Air group kicked off a transformation programme last year, vowing bold and potentially radical actions to tackle costs as it got squeezed by Middle Eastern carriers and budget operators at both ends.

While the company has revealed little else, the process may include job cuts, CEO Goh Choon Phong said in June.

The airline, whose shares have declined 3.6% this month, is under pressure to turn its performance around in a year the International Air Transport Association predicts the global airline industry will make a record profit.

“Pressure on yields remains as competitors mount significant capacity in key markets with aggressive pricing,” the company said in a statement on Tuesday. “These challenging market conditions have been exacerbated by recent fuel price movements,” it said, referring to gains in crude oil prices.

Net income last quarter rose to S$286.1 million (RM848.97 million), from S$177.2 million a year earlier, the best since end-2010. Operating profit at Scoot rose 48%, while that of SilkAir fell 37%.