Singapore warns of weak outlook despite Q3 rise in net profits

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Singapore Airlines Group warned of a difficult outlook for international air travel after a 17% drop in its third quarter operating profit to S$131 million ($105 million).

Group net profit for the quarter ending 31 December 2012 rose by 6% to S$143 million in comparison to the corresponding period in 2011, due to the sale of aircraft, spares and spare engines as well as higher net interest income.

This was partially offset by a S$20 million provision for SIA Cargo in relation to its civil penalty proceedings in Australia and New Zealand for its role in a cargo price-fixing cartel.

Singapore Airlines' passenger traffic for the quarter saw a 7.4% increase, measured in RPKs, outstripping a capacity expansion, measured in ASKs of 4.6%, which it says was due to promotional activities. While the airline's overall load factor improved 2.1 percentage points to 79.3%, this was offset by a drop in yield of 5.7%.

Regional subsidiary SilkAir's traffic growth of 14.2% and capacity expansion of 19.4% resulted in a S$2 million increase in its contribution to the group's operating profit of S$34 million.

In a statement the group says looking forward the outlook remains challenging due to a depressed cargo market as well as the economic climate in Europe and the USA. It expects loads and yields of its passenger and cargo businesses to remain under pressure "while the price of jet fuel continues to be at a historical high".