Published November 11, 2009

SIA posts Q2 net loss of $159m

Fuel hedging losses, poor yields cited; loss lower than Q1's $307m deficit

By VEN SREENIVASAN

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A COMBINATION of fuel hedging losses and poor yields has led Singapore Airlines to post a second consecutive quarterly loss.

Related links: Click here for SIA's news release Financial statements

But the net loss of $159 million for the July-September second quarter - against a net profit of $323.8 million a year ago - was significantly lower than the $307 million of red ink in SIA's Q1 ended June.

Q2 group revenue of $3.08 billion was 30 per cent down from last year's $4.4 billion, but 7.3 per cent up from Q1's $2.9 billion.

For the first half, SIA posted a net loss of $465.9 million, versus a net profit of $682.4 million a year back. The latest H1 result was on a 30 per cent drop in topline revenue to $5.95 billion, from $8.55 billion in April-September 2008.

Rising jet kerosene prices pushed up expenditure in the latest Q2 by $73 million or 2.3 per cent from the previous quarter. And fuel costs ex-hedging were $202 million higher than the previous quarter at $942 million.

But the pick-up in fuel prices helped reduce SIA's fuel hedging loss by $87 million to $200 million; during its first quarter, SIA posted a hedging loss of $287 million.

On the operating front, yields continued to remain under pressure.

Q2 passenger yield was 9.8 cents/kilometre, versus 10.2 cents during Q1. On a year-on-year basis, Q2 yield was down 23.4 per cent, versus a 17.7 per cent annual fall in Q1.

The average yield for the first half was 10 cents/km, a 21 per cent drop from a year earlier.

Despite capacity cuts, the Q2 passenger load factor was 79.6 per cent, versus a breakeven level of 88.8 per cent. Still, this was a sequential improvement from the load factor of 71.6 per cent in Q1. For the first half, the passenger load factor was 75.6 per cent, versus a breakeven of 86 per cent.

The operating results of the main companies in the SIA Group for the half-year are:

Singapore Airlines - operating loss of $428 million (versus profit of $495 million in 2008)

SIA Engineering - operating profit of $47 million (versus profit of $57 million in 2008)

SIA Cargo - operating loss of $193 million (versus loss of $76 million in 2008)

SilkAir - operating loss of $5 million (versus profit of $5 million in 2008).

SATS Group ceased to be a subsidiary of SIA on Sept 1 but contributed $71 million to the group operating profit in the April-August period.

SIA's equity attributable to equity holders decreased $1.5 billion or 10.6 per cent to $12.5 billion at end-September. And total group assets fell $2.9 billion or 11.7 per cent to $21.9 billion, mainly due to the $2.05 billion divestment of SATS Group.

Still, SIA had $3.5 billion in cash at end-September.

In its forward-looking statement, SIA said advance bookings indicate demand for air travel has stopped declining and is gradually recovering.

'The capacity programmed for the remainder of the year appears well matched to the demand,' it said. 'The market conditions allow for some rollback of promotional pricing but yields are unlikely to get back to pre-crisis levels within the next six months.'

For the October-March half of the current financial year, SIA has hedged 3.5 million barrels of jet fuel - about 20 per cent of projected uplift - at an average price of US$100 a barrel.

'If the recent rise in the price of fuel does not retreat, hedging losses will be reduced, but conversely operating cost will be higher,' it said in a statement.

The latest results translate into net asset value per share of $10.51 at end-September, versus $11.78 at end-March 2009. No interim dividend has been declared.