Singapore Airlines is citing higher fuel costs as the prime factor for a sharp decline in group profitability in the first half, as operating profit fell 78% to $$134 million ($105 million).
Group revenues grew 3% over the first half of its financial year to $7.28 billion. This was based on higher passenger numbers, while yields remained constant.
But group costs over the same period jumped 10% to S$7.14 billion, as its fuel bill rose nearly a third. Consequently operating profits fell to $134 million for the period and net profit dropped 62% to S$239 million. Second quarter operating profits were down to S$123 million compared to $346 million for the same period a year ago.
The largest fall in profitability was seen at the mainline carrier, where first half operating profits slipped from $380 million to $53 million. Profits at its cargo arm were down to S$31 million from S$100 million, but remained relatively unchanged for regional arm SilkAir and SIA Engineering at S$34 million and S$69 million respectively.
Pointing to economic uncertainty and weak consumer confidence, together with other weak global economic indicators, the Star Alliance carrier said passenger and cargo yields are expected to remain under pressure. "Exacerbating the impact of the weak outlook is the high cost of fuel which is compounded by the recent strength in the US dollar," the airline said. "In this difficult operating environment [the group] will monitor and respond appropriately to changing business trends and continue to exercise tight cost control."