First quarterly loss for SIA in 5 years

SINGAPORE (The Straits Times/ANN) - Earnings hit by intense competition, airline says as it sets up new unit for business review.

Singapore Airlines (SIA) has set up a new unit to review its entire business - a move that comes in the wake of its first quarterly loss in five years.

The carrier, which lost $138 million in the three months to March 31, said yesterday that the review will include network and fleet planning, and products and services.

SIA also announced that it will dump four of its 19 Airbus 380 superjumbos, amid airlines' growing concerns over the aircraft's engine performance and maintenance needs. But it will collect three new A-380s during this financial year, a step that will take its total fleet to 109 aircraft - three more than in the last financial year - by March 31, 2018.

The updates came yesterday as SIA reported the $138 million loss in the fourth quarter, compared with a $225 million net profit in the same period a year earlier.

Full-year profits fell by 55.2 per cent to $360 million.

The weak earnings were due mainly to "intense competition", which continues to exert pressure on yields amid persistent cost pressures, SIA said.

This is especially so in the premium sector, which continues to account for a significant portion of the group's revenues, even as steps are being taken to grow the budget arms, Scoot and Tigerair.

Group revenue came in at $14.9 billion for the full year, down 2.4 per cent from a year earlier, partly because of lower passenger turnover from the parent premium airline and lower cargo revenue.

Total spending fell 2.1 per cent to $14.2 billion, due in part to lower fuel prices.

Operating profit in the fourth quarter fell 81.7 per cent to $28 million while group revenue was relatively flat at $3.7 billion, with spending up 3.5 per cent year on year to the same amount.

SIA has proposed a final dividend of 11 cents per share. Including the interim dividend of nine cents per share paid last November, the total dividend for the 2016-2017 financial year will be 20 cents per share.

Full-year earnings per share fell to 30.5 cents from 69 cents a year earlier, while net asset value per share was $11.07 as of March 31, up from $10.96 a year earlier.

The airline faces a challenging operating environment that has pushed fares and yields down, analysts said.

But SIA said strategic initiatives implemented to address structural changes in the industry are now showing results. Building on this foundation, the next phase of the SIA group's transformation has been launched, the airline added.

A new Transformation Office that has been set up, for example, is aimed at identifying new revenue-generation opportunities and reshaping the business into one that continues to deliver high-quality products and services, though with a significantly improved cost base and higher levels of efficiency, SIA said.

SIA shares closed 0.2 per cent or two cents up at $10.76, before the results were announced yesterday.


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