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SIA subsidiary SilkAir suffers quarterly loss amid Max grounding

Singapore Airlines has reported that its parent company made a S$200 million ($146 million) operating profit in its first quarter ended 30 June, but subsidiaries SilkAir and Scoot were loss-making in the period.

SilkAir swung to an S$16 million operating loss as it was "significantly impacted" by the continued groundings of its six Boeing 737 Max 8s and the consequent reductions in capacity and yield. The regional carrier's revenue dropped S$10 million as its capacity was cut 1.6% and yields shrunk 2.9%. The airline had made a narrow S$200,000 profit in the same three months of 2018.

SIA says in its earnings statement that it has been taking measures to mitigate the Max groundings, which have "disrupted the group's operations and rate of expansion". Among them are operation of extra flights to SilkAir-served cities Kuala Lumpur, Phuket and Yangon by the parent airline.

Meanwhile, low-cost subsidiary Scoot turned in an S$37 million operating loss for the quarter after costs rose. It had made a profit of S$1 million in the same period a year earlier.

Expenses climbed 10% to S$42 million amid fleet growth. The airline also saw net fuel costs grow 7.9%. Revenue from flying was up S$14 million, but unit revenue shrunk 2.1%. The airline reduced its aircraft utilisation to boost on-time performance, capping capacity growth in the period at 6.5%. Scoot recently revealed it would take 16 new Airbus A321neos at the end of 2020.

The full Singapore Airlines group made a net profit of S$111 million during the three-month period, a decrease of 21% compared with the same period in 2018. "The reduction was largely attributable to a higher share of losses from associated companies (minus $31 million), as an improvement in Vistara's performance was offset by higher estimated losses from Virgin Australia," the airline noted in its earnings release. The group also saw net finance charges rise.

Group revenue increased 6.7% to about S$4.1 billion.Total expenses meanwhile rose 6.9% to about S$3.9 billion.

The airline notes that premium traffic is helping the bookings trend, alongside capacity growth, which ran to 7.4% in the first quarter. However, the cargo business is facing challenges as trade disputes affect the region, recording S$45 million lower revenue from flying amid a decline in yields and load factors.

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