SINGAPORE AIRLINES (SIA) turned in another strong profits rise over the first half of its financial year and is "cautiously optimistic" that the improvement will continue, helped by signs of an upturn in passenger traffic.

Group net profits for the six months to the end of September were up by more than 13%, to S$523 million ($368 million), putting the group on course to climb back above S$1 billion for the full 1995/6 financial year.

Passenger traffic growth of 7.8% was comfortably ahead of a 6.4% increase in seat capacity, helping load factors to edge up to 72.8%. Demand is expected to continue to grow, according to managing director Cheong Choong Kong.

"The last few months have seen a distinct improvement in passenger load factors," he says, although he warns that intense competition and the strength of the Singapore dollar continue to put pressure on yields.

Passenger yields were down by 3.7% over the half-year, but unit costs fell even faster, declining by 5.7% system-wide and bringing down scheduled load factors by almost a whole percentage point.

"It's the same old story - the strength of the Singapore dollar diluting revenue from abroad, but SIA still coming out on top with a very strict control of costs," says Jean Louis Morisot, airline analyst at Paribas Capital Markets.

Despite the overall pressure on yields, UK general manager Stephen Lek comments that there has been a 12% growth in premium traffic from the UK, helped by the decision in March to make all flights from London Heathrow non-stop services.

The fast-growing cargo business raised capacity by 14% over the half, with the addition of another Boeing 747-400 freighter, but load factors were down and yields slipped by 4%. SIA expects the business to remain "steady", but highly competitive.

SIA also reported lower losses for its subsidiary carrier, SilkAir. The airline has reduced its fleet to better suit capacity, by leasing its two Airbus Industrie A310s back to SIA and leasing replacement Fokker 70s.

Unprofitable routes, such as Singapore to Kaohsiung, have also been transferred to the parent carrier.

Source: Flight International