Singapore Airlines’ profits hammered and passenger numbers fall

South East Asia's biggest carrier feels the squeeze from Arabian Gulf competitors and local budget airlines and says situation unlikely to improve this year.

A Singapore Airlines Airbus A380 making its final approach at Hong Kong's international airport. The carrier has reported a fall in profits. Mike Clarke / AFP

Singapore Airlines, South East Asia’s biggest carrier, posted a 36 per cent drop in third-quarter profit as passenger numbers declined and the company wrote down the value of a budget unit’s brand.

The marquee carrier, which is battling overcapacity and aggressive pricing by budget airlines locally and the Arabian Gulf’s “Big Three”, Etihad, Emirates and Qatar Airways, said 2017 will be another challenging year amid “tepid global economic conditions and geopolitical concerns”. Hong Kong-based rival Cathay Pacific Airways said last month it will eliminate some positions as part of a business review, with key changes set to kick in by mid-year.

To counter some of the challenges posed by Middle East and budget airlines, Singapore Airlines has been adding fuel-efficient aircraft to its fleet and teaming up with other carriers to offer more destinations.

The carrier marked its inaugural flight of its Airbus A350-900 to Amsterdam in May last year.

Net income in the three months through December fell to S$177.2 million (Dh459.1m) from S$274.9m a year ago, with the drop attributed to a S$79m writedown due to the rebranding of Tigerair, Singapore Air said. Revenue slipped 2 per cent to S$3.8 billion.

The decline in operating profit at the parent airline during the quarter was the steepest at about 17 per cent, while it was 9 per cent at SilkAir. Scoot recorded an 11 per cent increase.

Singapore’s third-quarter fuel-hedging loss stood at S$42.2m compared with S$298.6m a year earlier. The main carrier’s third-quarter operating profit at S$151m was down from S$181m in the year earlier period; SilkAir was at S$30m against S$33m; Scoot at S$20m was up from S$18m; Tigerair was unchanged at S$9m.

* Bloomberg

Follow The National's Business section on Twitter