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Singapore Airlines Reports Record Operating and Net Profit for 9M FY2024: 5 Highlights from the Airline’s Latest Earnings

SIA
SIA

Next in line to report its latest results is Singapore Airlines Limited (SGX: C6L), or SIA.

Singapore’s national carrier saw a mixed financial result for the quarter but achieved a record operating and net profit for the first nine months of fiscal 2024 (9M FY2024).

The blue-chip airline, however, warned of heightened competition along with macroeconomic challenges and inflationary pressures.

Here are five things that investors can learn from SIA’s latest business update.

1. A mixed financial performance

For SIA’s third quarter of fiscal 2024 (3Q FY2024) ending 31 December 2023, revenue rose 4.9% year on year to S$5.1 billion.

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The higher revenue was because of a rebound in travel demand as China, Hong Kong, Japan, and Taiwan fully reopened.

Group operating profit for 3Q FY2024, however, tumbled by 19.3% year on year to S$609 million on the back of a 9.3% year-on-year increase in total expenditure.

Although passenger revenue increased year-on-year, SIA saw lower cargo revenue coupled with higher net fuel costs.

Higher staff costs, landing charges, aircraft maintenance, and overhaul costs also ate into the airline’s operating profit.

Despite the weaker operating profit, net profit inched up close to 5% year on year to S$659 million, aided by higher net interest income and share of profits from associated companies.

For 9M FY2024, SIA’s total revenue increased by 7.4% year on year to S$14.2 billion.

Operating profit improved by 8.7% year on year to S$2.2 billion, a new record.

Net profit surged by 35% year on year to S$2.1 billion, the first time that this metric has exceeded the S$2 billion mark for the first nine months of the fiscal year.

2. Healthy passenger traffic offset by lower cargo yields

Passenger volume stayed healthy as demand for air travel remained strong.

Both SIA and Scoot, its low-cost carrier, ferried 9.5 million passengers for the quarter for a 29.4% year-on-year increase.

While capacity expanded by close to 18%, it was outpaced by the growth of 19.1% in passenger traffic.

These strong numbers helped to lift the group passenger load factor by 0.8 percentage points to 88.2%.

Moving on to the cargo segment, loads increased marginally by 4% year on year because of strong year-end demand for e-commerce.

However, it was offset by a plunge in cargo yields as they fell by 37.4% year on year.

Despite this, cargo yields were still 32.1% higher than pre-pandemic levels.

3. Adding more planes to SIA’s fleet

As of 31 December 2023, SIA’s operating fleet comprised 195 passenger aircraft and seven freighters for a total of 202 aircraft.

The average age of the fleet was seven years and one month.

SIA added three Boeing 787-10s to its fleet during 3Q FY2024 while Scoot will add its first Embraer E190-E2 aircraft in April this year.

The airline has 92 aircraft on order.

4. Ramping up to pre-pandemic capacity levels

SIA has been gradually ramping up its flight network as more countries fully reopen.

During 3Q FY2024, the carrier reinstated services to Chongqing and Xiamen with Scoot resuming flights to Kunming.

With these resumptions, the group now flies to 23 destinations in China, just slightly below the 25 it had pre-pandemic.

From 31 March to 26 October this year, SIA plans to ramp up flights to Fukuoka and Nagoya in Japan from five times weekly to daily.

It also intends to gain regulatory approval to launch five times weekly flights from Singapore to London’s Gatwick Airport in June 2024.

SIA envisions that its capacity levels should return to pre-pandemic levels by FY2025.

5. A cautious outlook

The airline offered a cautious outlook for the first half of this calendar year.

While the demand for leisure travel remains strong, passenger yields will be under pressure from increased competition as the industry restores capacity across the board.

Economic uncertainty and geopolitical troubles may also weigh on consumer sentiment and hold people back from spending.

Coupled with high fuel prices and inflation, airlines in general are facing a tougher cost environment and may see expenses rise more than revenue.

Get Smart: Sustainable aviation fuel

From 2026, travellers who fly out of Singapore need to pay higher airfares as the government will impose a levy to require flights to use environmentally sustainable jet fuel.

The levy will vary based on factors such as flight distance and class of travel.

At this point, it is estimated that passengers on short-haul flights need to pay S$3 more while those on medium and long-haul flights need to pay an additional S$6 and S$16, respectively.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

The post Singapore Airlines Reports Record Operating and Net Profit for 9M FY2024: 5 Highlights from the Airline’s Latest Earnings appeared first on The Smart Investor.