Singapore Airlines shares fall, bucks gains among Asian carriers

Singapore • Singapore Airlines Ltd bucked a rally among Asian airline stocks after reporting its biggest profit decline in at least seven years.

While shares of Cathay Pacific Airways Ltd, Korean Air Lines Co and regional rivals all gained during the Asian day following a plunge in oil prices, Singapore Airlines  fell after saying its profits had declined because of a higher bill for buying kerosene. In New York on Tuesday, oil futures fell the most in three years after OPEC projected a darker demand outlook.

Net income at Singapore Airlines  fell to S$56.4 million (RM171.4 million) in the three months ended Sept 30, from S$293.3 million a year earlier, the company said after the market’s close on Tuesday. The carrier’s fuel costs climbed 24% to S$1.16 billion in the quarter as average Brent prices soared 46% from a year earlier.

Singapore Airlines  joins rivals such as Deutsche Lufthansa AG whose earnings have been damped by oil costs, the biggest expense for Asian operators. A rebound in profit at the Asian carrier hinges on weak oil and earnings should improve for the rest of the fiscal year, according to Bloomberg Intelligence.

“Its second-quarter financial year 2019’s results reflect a period of rising fuel costs,” UOB Kay Hian analyst K Ajith wrote in a report yesterday. “Jet fuel prices have weakened since then and Brent crude prices have weakened despite Saudi Arabia’s plans to cut production.”

West Texas Intermediate futures for December delivery fell US$4.24 to end the session at US$55.69 (RM233.90) a barrel on the New York Mercantile Exchange on Tuesday. Brent for January settlement closed down US$4.65 at US$65.47 on the London-based ICE Futures Europe exchange.

While sales in the three-month period rose 5.6% to S$4.06 billion, Singapore Airlines’ passenger yields slipped 1% in the second quarterly decline, reflecting continued competition in both its premium and economy offerings. Yields are a measure of the money earned from carrying a passenger for 1km.

Cargo yields climbed 9.9% as shippers rushed to beat tariff increases sparked by the trade dispute between the world’s two biggest economies.

Singapore Airlines  posted a fuel-hedging gain of S$151.7 million, compared to a hedging loss of S$3.3 million a year earlier. Its quarterly losses from associate companies amounted to S$117.1 million, largely due to accounting adjustments made for its Virgin Australia shares. — Bloomberg