High oil price and lower fares hit the bottom line for the best airline in the world.
Q1 (April-June) net profit down 59 percent
Analysts and financial institutions had expected a better Q1 result and were taken by surprise by Singapore Airlines sharp drop in profit. The airline had surpassed market expectations in May when it reported a 148 percent increase in 2017 full year profit, the best result since 2011.
The two low-cost brands in the Singapore Airlines family, Scoot and SilkAir posted a combined surplus of 1 million Singapore dollars (1 USD = 1.36 Singapore dollar S$).
High oil price and lower fares
Singapore Airlines flying mostly long-haul flights, use a lot of fuel and have hedged 47 percent of its planned fuel consumption. Despite hedge, the fuel bill increased with 154 million Singapore dollars and pushing down the financial results.
More competition and capacity in the key markets drive fares down, this hit in particular the yields for the two low-cost brands, especially SilkAir who faces stiff competition from AirAsia.
Awarded Airline of the Year by Skytrax
Singapore Airlines was in early July awarded the most prestigious airline award, when Skytrax named it Airline of the Year 2018. This acclamation is likely to steer more high yield passengers to the airline and boost its revenues for the remaining 2018. Skytrax measures more than 300 airlines and winning the Airline of the Year award is about the best an airline can achieve. Singapore Airlines is operating into Stockholm Arlanda and Copenhagen Kastrup in Scandinavia, it cooperates with SAS and is a Star Alliance member.
Singapore Airlines Q1 result at a glance
Group revenue S$3.84 billion -0.5%
Passenger volume 8.8 million +7.5% and load factor at 82.6% +2.2pu.
Net profit S$139.6 million -59%
Outlook for the remaining year
Cost to remain under pressure, mainly driven by high fuel prices. Passenger demand is expected to grow the coming months, but competition in the key markets is persistent and effect yields negative.
Singapore Airlines Group will continue to focus its efforts on initiatives to grow revenue, enhance customer experience and improve operational efficiency.