Singapore Airline runs into turbulence as shares slump on surprise loss

SIA Cargo to be Re-Integrated as Division within Singapore Airlines

SIA Cargo to be Re-Integrated as Division within Singapore Airlines

SIA is following in the footsteps of the other marquee Asian carrier Cathay Pacific Airways, which has embarked on a three-year revamp to cut costs after reporting its first floss in eight years.

Net loss in the quarter through March was S$138.3 million, the first since the same period in 2012, compared with an estimate for a profit of S$54.3 million in a Bloomberg survey of analysts. SIA, which is under pressure from regional discount carriers and Middle-Eastern rivals, said in February that 2017 will be a challenging year as passenger and cargo yields - a key measure of profitability - remain under stress.

SIA said the outlook is for further pressure on yields, as a result of "intense competition arising from excess capacity in major markets, alongside geopolitical and economic uncertainty".

The mainline airline will remove two A330-300s, four A380s and three Boeing 777s to bring its fleet to 109 aircraft by the end of the financial year.

SilkAir, now operating 30 Airbus and Boeing single-aisle aircraft, will get its first four 737 MAX 8 aircraft in 2017-18, while Budget Aviation Holdings will add four 787s.

As part of efforts to adapt to this new environment, SIA established Scoot to capture a slice of the growling low-priced long-haul market, while it recently took full control of short-haul LCC Tigerair Singapore.

On a positive note, the group maintains that strategic initiatives implemented to address structural changes in the industry are now showing positive results.

A new office has been set up to conduct a review, encompassing network and fleet, product and service as well as organisational structure and processes, to better position the group for long-term sustainable growth across its portfolio of full-service and budget airline operations.

Operating profit for the parent airline company fell about 20 percent to S$386 million.

Building on this foundation, the next phase of the SIA group's transformation has been launched, it said. Load factor slipped to 79%.

SIA Cargo now has seven aircraft in its freighter fleet, while the proportion of revenue from passenger aircraft bellyhold capacity has increased significantly, SIA said. Cargo revenue was also down S$87 million on the back of cargo yield erosion, notwithstanding higher freight carriage.

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