Singapore Q4 Slumps, Flu Fears May Delay Recovery
Singapore Airlines, the world's largest carrier by market value, posted a sharp drop in quarterly net profit, hit by fuel hedging losses and a weak travel market, and warned that a recent flu outbreak could delay air travel recovery.
Singapore Air, which ranks just ahead of Air China in market value, said weak demand for business travel and spending on promotions will also keep revenue under pressure.
"Advance bookings indicate that the drop in demand for air travel is leveling out. However, the probability of a sustained recovery has been set back by uncertainties arising from the Influenza A epidemic," the company said in a statement.
Singapore Air has seen falling passenger and cargo demand this year as the global slowdown hurt business and leisure travel, forcing it to reduce capacity and cut staff working hours.
Andrew Herdman, director-general of the Association of Asia Pacific Airlines, an industry lobby group, said the outlook for carriers such as SIA, which relies more on long-haul flights and premium passengers, remains weak.
"Airlines have been cutting capacity, but load factors are falling faster... In particular, premium traffic has continued to weaken."
"We haven't seen a downturn of this severity before. The depth of the downturn has taken many people by surprise."
Singapore Air, valued at USD$9.8 billion, recorded SGD$543 million in hedging losses, which included SGD$112 million in losses from the early termination of some fuel hedging contracts before maturity.
January-March net profit slumped to SGD$41.9 million (USD$28.6 million) from SGD$527.5 million a year ago.
Full-year net profit halved to SGD$1.06 billion, in line with market forecasts.
The company's overall load factor dropped to 62.6 percent in March from 65.8 percent in December. The airline has said it plans to cut capacity by 11 percent in the year from April.
Earlier this week, Japan Airlines posted a USD$643 million annual net loss and forecast more losses for this year. The Nikkei newspaper said JAL could cut 1,200 jobs.
Last month, regional rival Qantas Airways forecast its first second-half loss in six years and said it was cutting capacity and jobs as it battles a slump in passenger demand and rising competition.
The International Air Transport Association (IATA) had said total losses of world airlines in 2009 are likely to exceed the USD$2.5 billion forecast previously as the global economic crisis hits passenger and cargo traffic.
