Singapore Airlines Ltd. posted its first operating loss in six years after the global recession caused an 18 percent plunge in passenger numbers.
The world’s second-biggest carrier by market value had an operating loss of S$28 million ($19 million) in the three months ended March compared with an operating profit of S$468 million a year earlier. Sales dropped 19 percent to S$3.32 billion, the airline said in a statement today.
Chief Executive Officer Chew Choon Seng has cut work days, frozen wages and begun taking planes out of service to battle the slowdown. Japan Airlines Corp., Cathay Pacific Airways Ltd. and British Airways Plc have also all posted losses as business and leisure travelers curb flying amid the economic slump.
“Nothing good is going to come out from the aviation space right now,” said Jim Eckes, managing director of industry adviser Indoswiss Aviation. “It’s a bad quarter for everyone. Airlines may need to ground more planes, delay aircraft deliveries and further cut staff costs.”
Fourth-quarter net income sank 92 percent to S$41.9 million, or 3.5 cents a share, from S$527.5 million, or 44.1 cents, a year earlier.
“In the near term, promotional pricing and reduced business travel will keep revenue under pressure,” the carrier said in the statement. Savings from the drop in fuel prices “will be offset by progressive settlement of fuel hedges contracted at higher prices.”
The airline plans to pay a final dividend of 20 cents a share, taking the total payout for the year to 40 cents a share. Singapore Air said it’s also proposing to distribute stock it has in unit Singapore Airport Terminal Services Ltd. to shareholders.
Spending on jet fuel, which accounted for 39 percent of total expenditure, was little changed at S$1.3 billion in the quarter. The carrier said it made a loss of S$543 million on fuel hedging, which included a $112 million deficit from the early termination of several contracts before maturity dates.
Jet fuel prices in Singapore averaged $55.21 a barrel in the three months ended March, 52 percent lower than a year earlier, according to Bloomberg data.
The carrier fell 4.3 percent to S$11.60 in Singapore trading today. Earnings were released after the market closed. Of the 19 analysts tracked by Bloomberg data in the past 12 months, nine recommend that investors sell the stock, six have “hold” ratings, while the remainder have “buy” calls.
Singapore Air flew 3.9 million passengers in the quarter compared with 4.76 million a year earlier. Passenger traffic, or the total distance it carried paying customers, fell 15 percent.
Passenger yield, or average revenue per seat, dropped to 11.8 cents per kilometer from 12.5 cents a year earlier. The carrier, which gets about 40 percent of revenue from business travelers, filled an average 71.2 percent of its seats in the quarter compared with 79.4 percent a year earlier.
“A recovery in the global economy is not yet certain and demand for premium air travel is likely to remain weak in the coming months,” Paul Yong, an analyst at DBS Securities (Singapore) Pte, wrote in a May 8 report.
Cathay, Hong Kong’s largest airline, said last month about 70 percent of staff have agreed to take unpaid leave. Qantas Airways Ltd., Australia’s biggest carrier, is forecasting a record second-half loss and plans to cut 5 percent of staff amid slumping demand. Korean Air Lines Co., South Korea’s largest carrier, posted its sixth quarterly loss last week.
Singapore Air has already cut flights, reorganized its network and said it wants to cut 11 percent of capacity, from April, to battle what Chew calls a “sharp and swift” drop in air travel. Senior staff at the carrier also started working fewer days each month from April, with other managers, ground staff and cabin following suit this month.
For the year ended March, the carrier’s net income fell 48 percent to S$1.06 billion, matching the median of 12 analyst estimates compiled by Bloomberg.