Singapore Airlines Earnings Fall Amidst Competition and Rising Costs

By Roshan Thomas

(Reuters) – Singapore Airlines on Friday noted that its earnings would remain pressured despite strong travel demand in the second half of the year. The airline's profit decline reflects tough market competition and rising expenses.

The flag carrier of the city-state stated that the aviation industry is facing macro-economic uncertainties, geopolitical tensions, inflation, and increased competition.

> "The Group will remain nimble and agile, adjusting its passenger network and capacity to match evolving demand patterns," said the airline, highlighting healthy demand for air freight as the year-end peak approaches.

Singapore Airlines (OTC:SINGY) Group includes the main flag carrier and the budget airline Scoot.

The leading airline operator in Singapore reported a 48.5% drop in net profit to S$742 million ($561.65 million) for the April-September period, alongside an interim dividend of 10 Singapore cents per share. Last year, the group recorded a net profit of S$1.44 billion.

SIA's total expenses increased to S$8.70 billion for the half-year ending Sept. 30, a rise of 14.4%, driven by increased fuel and non-fuel costs. Meanwhile, passenger yield, a measure of air fares, fell by 5.6% in the first half.

Revenue saw a 3.7% increase from a year ago, totaling S$9.50 billion. The passenger load factor—indicating seat occupancy—was 86.4% in the first half, down from 88.8% a year prior.

> “Increased capacity and stronger competition in key markets led to yield moderation, resulting in lower operating profit,” Singapore Airlines stated.

Globally, airlines have increased the number of flights and routes to meet robust travel demand, heightening competition and pressuring ticket prices and profit margins.

Morningstar analysts have noted that the rise in international capacity among global airlines is contributing to heightened competition.

AIR INDIA-VISTARA MERGER PROGRESS

Singapore Airlines expects to record a non-cash accounting gain of S$1.1 billion once the Air India-Vistara merger is completed, anticipated in November.

The flagship carrier of Singapore announced plans to merge Vistara, a decade-old airline, with Tata-owned Air India in November 2022. This move aims to create a leading full-service airline for domestic and international markets.

Singapore Airlines (SIA) is set to acquire a 25.1% stake in Air India and will invest S$498 million into the new combined entity through the subscription of new Air India shares.

> ($1 = 1.3211 Singapore dollars)