Third quarter net profit dips over $ 199 m provision
SIA Group last week announced it has recorded a net profit of $921 million for the April-December period, a turnaround from the net loss of $62 million in the same nine months of the previous year.
For the nine months to December 2010, the Group recorded an operating profit of $1,105 million, a turnaround from the $178 million operating loss in the same period the previous year.
Group revenue improved 17% (+$1,567 million) to $10,938 million while Group expenditure rose at a slower rate of 3% (+$283 million) to $9,833 million.
In the third quarter the Group made an operating profit of $509 million in the third quarter of the 2010-11 financial year, an increase of $186 million (+58%) over the same quarter last year.
Group revenue at $3,841 million grew $423 million (+12%) year-on-year, supported by continued improvement in carriage and yields. On the cost side, Group expenditure rose $237 million (+8%) to $3,332 million. Expenditure on fuel before hedging increased $154 million owing to higher jet fuel prices.
Group net profit for the third quarter was $288 million, a decline of $116 million from the corresponding period a year earlier. In the quarter, a $199 million provision was made in accordance with the Singapore Financial Reporting Standards for fines imposed.
While SIA Cargo has accepted the plea offer made by the United States Department of Justice, it has filed appeals against fines imposed by the European Commission and the South Korean Fair Trade Commission, and intends to contest these fines [see Note 2 below]. Excluding the fines, Group net profit improved by 21%.
The Parent Airline Company earned an operating profit of $378 million in the third quarter, $147 million more than in the same three months of the previous year. All the main companies in the Group were profitable, with improved operating performance.
- SIA Cargo Operating profit of $48 million (+18%)
- SilkAir Operating profit of $45 million (+93%)
- SIA Engineering Operating profit of $34 million (+58%)
During the October-December quarter, Singapore Airlines took delivery of two Airbus A330-300s and reinstated one Boeing 747-400 and one Boeing 777. As at 31 December 2010, the operating fleet comprised 109 passenger aircraft – eight B747- 400s, sixty-six B777s, nineteen A330-300s, eleven A380-800s and five A340-500s – with an average age of six years and two months.
Additional capacity was added during the quarter to popular destinations including Osaka, Seoul and Houston (via Moscow). Twice-daily services were also inaugurated to Tokyo Haneda airport.
With regard to future outlook, the SIA said as airlines including SIA continue to inject capacity, advance passenger bookings for the final quarter of the 2010-11 financial year are levelling off.
For air cargo, regional differences will continue to be marked in 2011 with strength in Asia Pacific and uncertainties in Europe markets. Growth for airfreight is expected to continue for the rest of the financial year, albeit at a slower rate. On the cost side, jet fuel prices are at two year highs and trending up. Fuel remains the biggest expense item for the Group.
Singapore Airline’s new Chief is high flier but low-profile
Reuters: He became the public face of Singapore’s most iconic company, Singapore Airlines, at the start of the year but it’s unlikely the CEO title will change Goh Choon Phong, who is low-profile to the point of near-anonymity.
Goh’s predecessor Chew Choon Seng, now the Chairman of Singapore Exchange, became one of the most influential people in the airline industry during his seven years in office, and is well-known for his passion for cars and watches.
Little however is known about Goh, except that at 47 he is one of the youngest CEOs of a major Singapore company. He is single, and joined Singapore Airlines as a cadet two decades ago after graduating from the Massachusetts Institute of Technology with three bachelors degrees and a masters degree.
At a news conference late last year after his appointment was announced, Goh, slim and clean-shaven, was reticent and politely declined any substantive comment.
His quick rise to the top and hands-on experience in almost every major division in the group underlines his capabilities, colleagues say, but that’s all most people know about him.
“I have not met him in person and neither have heard anyone talk about him at all,” said one Singapore-based airline staffer.
Another described Goh as “a very hard-working person, down to earth and a low-profile person. An all rounder with all the qualities the airline really needs.”
A former Singapore Airline executive said: “I met him once when he was VP Commercial Technology while he was on a holiday trip. He was dressed simply and looked like any other budget traveller – I guess he belongs to our generation of eco travellers.”
Goh is taking over with many advantages – the global recession is ending and the airline industry is on an uptrend. Yields are rising, his lucrative upper class passenger segment is again running to capacity and he is sitting on an S$ 6 billion cash pile.
The carrier reported on Friday a 29 per cent fall in its third quarter net profit, hit by provisions for a fine by the European Commission and settlement with the US authorities on cargo price-fixing.
But analysts say Goh is facing a challenge that Singapore Airlines (SIA) has never had to deal with before – the rise of Asian and Middle Eastern carriers which have been aggressively trying to challenge SIA’s lead in the premium market.
“First & foremost he has to preserve and prolong SIA’s edge in the premium sector,” Shukor Yusof, Singapore-based analyst for Standard & Poor’s told Reuters.
“Two-thirds of SIA’s sales are generated outside Singapore, so his job is to ensure high-end passengers stay loyal to the airline. This is getting tougher as competitors are improving their products and offering similar product at lower fares.”
In the past decade, the global airlines industry has seen the rise of Middle East carriers such as Emirates, Etihad and Qatar Airways, who have been aggressively expanding their fleets and reach, particularly in the premium market.
“When Chew took over, the situation was SIA was a very strong company dealing with the weak operating environment. Now from a competition point of view, SIA is a slightly weaker company in a robust operating environment,” RBS analyst Andrew Orchard said.