Singapore Air's Q4 net profit unexpectedly falls on fuel costs

[flee 5]

* Q4 net profit unexpectedly fall by 38.5 pct to S$171 mln

 

* Warns near-term weakess in load factor, sees firm jet fuel price

 

* Announces 80 Singapore cents special dividend

 

* Shares down 2.2 pct prior to the results (Adds background, company statement)

 

SINGAPORE, May 12 (Reuters) - Singapore Airlines (SIA) , the world's second-largest airline by market value, posted an unexpected fall in quarterly net profit due to soaring jet fuel prices and warned of weakness in load factor in the near-term partly due to the impact of Japan earthquake.

 

The carrier, 55 percent owned by Singapore state investor Temasek Holdings , also announced a special dividend of 80 Singapore cents on the top of final dividend of 40 Singapore cents.

 

"The twin challenges of near-term weakness in load factors and high fuel prices will adversely affect operating performance of airlines," SIA said in a statement.

 

Singapore Airlines said its January-March or fourth-quarter net profit was S$171 million ($138 million), down from S$278 million a year ago. Analysts' had expected net profit of S$298.3 million.

 

Revenue for the quarter climbed 7.5 percent from a year-ago to S$3.6 billion.

 

The airline increased its capacity, measured by available seat kilometer, by 2.3 percent through the 2010/2011 financial year to cope with stronger demand in the premium segment.

 

Still, some analysts highlighted concerns that competition from Middle Eastern carriers such as Emirates and Etihad in recent years into the Asian market and expansion by traditional rivals such as Cathay Pacific are likely to put more competitive pressure on Singapore Airlines.

 

The carrier narrowly escaped reporting a full-year loss for the first time in its history in the previous financial year, as the airline industry was hit by global recession, resulting in a total sector-wide loss of $10 billion in 2009.

 

The sector faces risks in the form of higher oil prices. Qantas Chief Executive Alan Joyce said last month as the cost of jet fuel was the single biggest threat to the aviation industry since the global credit crisis. [iD:nL3E7FJ0CB]

 

Singapore Airlines' share price has fallen about 7 percent since the start of the year, underperforming a 2 percent fall in the broader Singapore index .

 

SIA has outperformed both Qantas and Cathay Pacific, which have dropped 16.5 percent and 11 percent respectively. (Reporting by Harry Suhartono; Editing by Dhara Ranasinghe)

 

Source: http://www.reuters.com/article/2011/05/12/singaporeairlines-idUSL3E7GA14S20110512

 

SGX Announcement

 

News Release

 

Presentation Slides

[Mohd Suhaimi Fariz 2]

With fuel prices as high as they are now, certainly airlines will bear the effect. Please let the conflicts in the Middle East get solved as soon as possible.

[flee 5]

During the January-March quarter, Singapore Airlines decommissioned one B747-400 aircraft. As at 31 March 2011, the operating fleet comprised 108 passenger aircraft – seven B747-400s, sixty-six B777s, nineteen A330-300s, eleven A380-800s and five A340-500s – with an average age of 6 years and 3 months.

 

A new three-times-weekly service to Sao Paulo via Barcelona was launched on 28 March 2011, marking the addition of South America as the sixth continent in Singapore Airlines’ route network. Flight frequencies to popular destinations, including Hong Kong, Guangzhou, Taipei and Male, have been increased since the start of Northern Summer. Conversely, the Singapore-Los Angeles non-stop service has been reduced from seven to five flights per week.

 

In the year to March 2012, the Company expects to take delivery of eight A380-800s and decommission five B777s and all seven B747-400s. The net decrease of four aircraft will bring the operating fleet to a total of 104 aircraft by March 2012. The reduction in fleet size will be more than offset by increased utilisation to produce passenger capacity growth of 6 per cent in available seat-kilometres for the 2011-12 financial year.

 

Sad to see the B744's go. Changi will be so boring now, mostly B77Ws as they are also phasing out the B772s progressively.

[JuliusWong 0]

They retired 9V-SMU (the 1000th B747) during the financial period. I was lucky to board it when I did KUL-SIN-MEL last November. My first time on a B744. It was really an amazing experience!! As it was late night flight, not much pix.

 

However, I got B744 again on my return journey due to RR A380 fiasco....but blessing in disguise...got 9V-SPN which was stored previously in VCV. Took loads of pix

 

Sad to see the B744's go. Changi will be so boring now, mostly B77Ws as they are also phasing out the B772s progressively.

 

Agree...the aviation world is loaded with twin engines nowadays!! lets hope they hold onto A345 for next five years?? maybe??

[Josh T 0]

They retired 9V-SMU (the 1000th B747) during the financial period. I was lucky to board it when I did KUL-SIN-MEL last November. My first time on a B744. It was really an amazing experience!! As it was late night flight, not much pix.

 

However, I got B744 again on my return journey due to RR A380 fiasco....but blessing in disguise...got 9V-SPN which was stored previously in VCV. Took loads of pix

 

 

 

Agree...the aviation world is loaded with twin engines nowadays!! lets hope they hold onto A345 for next five years?? maybe??

We need more A380s then!

[BC Tam 2]

Please let the conflicts in the Middle East get solved as soon as possible.

Don't hold your breathe, they've been at it since recorded history began I believe

Not whilst outsiders with vested interests insist on 'mediating' anyway

[Josh T 0]

Yet, despite the ongoing conflicts in the Middle East, EK, EY and QR are making lots of money!

[Mohd Azizul Ramli 2]

Although the Q4 result was negatively effected by the rising fuel cost, from the full financial year's stand, SQ stands tall.

 

- Revenue is SGD 14.525 billion (+14.3% from previous financial year)

- Profit before tax is SGD 1.271 billion (+1,917.5% from previous financial year)

- Net profit is SGD 1.092 billion (+405.6% from previous financial year)

 

Now if we were to compare the results of the full 2010/11 financial year among 4 airlines - MH, AK, EK and SQ, it will look like this (all results are converted to MYR using forex rates on 31 March 2011 for comparison purpose):

 

 

Some notes to share:

- By revenue, MH is 3.3 times higher than AK, but EK is 3.4 times higher than MH while SQ is 2.7 timer higher than MH.

- However when it comes to gross profit, AK is 3.9 times higher than MH. EK's gross profit is 16 times higher than MH, while SQ's is 10.8 times higher than MH.

- Being a LCC with the lowest cost base in the world, the gross profit margin of AK is the highest with 27.5%. Among the legacies, EK managed to rake in the highest gross margin of 10.1%, followed by SQ with 8.8%. MH only managed to record 2.2% of gross margin, which suggesting something is seriously not right in its direct cost structure or pricing of its sales.

- 10.1% of gross margin recorded by EK suggested that the airline is having a very effective management that responded well to the variables in its sales and cost structures.

- AK's net profit is 4.5 times higher than MH. EK's net profit is 18.7 times higher than MH while SQ's is 11 times higher than MH.

- Net profit margin of the legacies are considerably lower at only 10% maximum versus a whopping 26.7% recorded by AK. EK recorded 9.9% of net margin while SQ with 7.5%. Again, MH comes in last with only 1.8% of net margin which means every RM 1 sales that MH made only generated 1.8 sen of profit versus 26.7 sen generated by AK to its stakeholders with the same RM 1 sales.

- In my opinion, gross margin is a better parameter to indicate which airline is doing well. This is because gross margin is taking into account all direct/operational revenues and costs only and also because net margin is calculated after deducting a significant item i.e. tax. Tax rates are different in all countries and for EK (as well as other MENA countries), tax are calculated differently and there is also another element called Zakah (Zakat) to be taking into consideration.

 

I also find the dividend that SQ is declaring is very generous. SGD 1.40 of dividend per share (!!!) [approximately RM 2.63 per share] versus 3 sen per share that AK is declaring and none from MH. EK is not subjected to pay any dividend because it is not a public listed entity.

[JuliusWong 0]

Where is my koko crunch?? Need it to help me to digest the numbers....lolx!

 

Thanks MAR for the very insightful analysis. God Bless, for "every RM 1 sales that MH made only generated 1.8 sen of profit versus 26.7 sen generated by AK to its stakeholders with the same RM 1 sales." (Ramli, 2011), MH is really acute in generating profit. Someone please throw them a life support machine~~~

Edited May 17, 2011 by JuliusWong

[Mohd Azizul Ramli 2]

LOL Julius! But I think we should not give MH anymore life support machine (wouldn't that be another bail out using public fund?). What we need is for critical financial parameters to be the key KPIs for MH's management to achieve (not something like issuing 2 million new Enrich cards to existing Enrich members or giving 2000 Enrich miles to existing Enrich members who updated their profiles LOL) so that it could record a respectable profit margins and be forced to drop all its current 'excess luggage' [if any] once and for all of eternity (thus enabling it to declare a share dividend to its shareholders) on par with its peers from the same category (EK and SQ in this exhibit which are also government-owned).

[BC Tam 2]

But I think we should not give MH anymore life support machine (wouldn't that be another bail out using public fund?)

I fear that is where MH seem heading for a revisit though

Notice the recent calls again from Sabah/Sarawak for 'improved air accessibility' to/from Europe and Australia ? Sarawak to extent of proposing some 50:50 partnership ?

And the KBR-BKI proposal ?

[flee 5]

Thanks for consolidating all the information for us, Azizul.

 

EK is not a listed company - so it is very good that we even got their trading numbers as they are not obliged to publish anything!

 

In a related development:

 

Malaysian Airline System Bhd fell to its lowest level in more than nine years in Kuala Lumpur trading after index provider MSCI Inc said the national carrier’s stock will be removed from the MSCI Malaysia Index.

 

The stock slid 2.9 per cent to RM1.69 at 9:09 a.m. set for its lowest close since Dec. 5, 2001.

 

The change will take place as of the close on May 31, MSCI said in a statement on its website. -- Bloomberg

[Mohd Azizul Ramli 2]

Thanks for consolidating all the information for us, Azizul.

The foundation is from your analysis in the thread where we discussed about MH full year 2010 financial results. Thanks for that.

 

EK is not a listed company - so it is very good that we even got their trading numbers as they are not obliged to publish anything!

I guess if you have great numbers, you should flaunt it out. It's the logical way to treat it. D7 did that many times too although in a more briefly manner as compared to EK. Don't be like FY which hides behind MH and keep on telling 'We are doing very good'. I personally do not buy it at all.

 

For EK I think their data have to be prepared in such manner in view of the requirement of its parent company, the Emirates Group, which is a public listed company. 2 of the largest 50-some subsidiaries under the Emirates Group are EK and dnata (a company like MAHB which manages airports). EK's net profit of AED 5.4 billion represents 91.5% of the Emirates Group's total net profit of AED 5.9 billion in financial year 2010/2011.

[N Azman 0]

do you have D7 financial figures? i've also only heard "we're doing very good" also from D7 ranks without seeing any financial figures. maybe you can share some of the figures you got here...

 

btw, dnata doesn't manage airports. they do ground handling, support services and a bit of TMC-ing, nothing near the big guns like AMEX and carlson.

[Ashraf 0]

Yet, despite the ongoing conflicts in the Middle East, EK, EY and QR are making lots of money!

 

 

Is EY and QR making money too?? any stats from their website?