SINGAPORE: Singapore Airlines (SIA) reported a record annual net profit on Thursday (May 15), boosted by a one-off gain from the merger of Air India and Vistara, but lower air fares in response to increased competition weighed on operating profit.
Singapore’s flag carrier said net profit was S$2.78 billion (US$2.14 billion) for the year ended Mar 31, compared with S$2.68 billion a year earlier.
The airline group recognised a one-off gain of about S$1.1 billion after completing the merger of its 49 per cent-owned Indian carrier Vistara with Air India last November.
Its operating profit fell 37 per cent from a year earlier, however, to S$1.71 billion, as passenger yields – a proxy for airfares – dropped by 5.5 per cent due to stiff competition as airlines globally added capacity.
Employees will be rewarded with a profit-sharing bonus of 7.45 months.
“This is based on a long-standing formula that has been agreed with our staff unions,” SIA said in response to CNA’s queries.
In the previous financial year, SIA gave its employees 7.94 months’ worth of profit-sharing bonus, the highest in the airline’s history.
While the airline carried a record annual number of passengers and described demand as robust, increased capacity in the industry drove ticket prices down, while fuel and expenditure rose, squeezing profit margins.
Following warnings from other carriers world-wide, SIA said US-led tariffs were likely to hit consumer and business confidence and weigh on passenger and cargo markets.
Annual cargo revenues rose 4.4 per cent on strong e-commerce and perishables demand, and from disruption to Red Sea shipping, but freight yields fell 7.8 per cent due to increased competition.
US carriers such as American Airlines and Delta pulled their forecasts, while Asian major Cathay Pacific said air cargo demand between mainland China and the US was likely to fall.
SIA declared a final dividend of 30 Singapore cents per share, lower than 38 Singapore cents declared a year earlier.
The Air India-Vistara merger, completed on Nov 12 last year, gives SIA a 25.1 per cent stake in Air India, allowing it to “participate directly in the fast-expanding Indian aviation market”, said SIA.
On the industry’s outlook, SIA said that the global airline industry faces a “challenging operating environment amid changing tariff policies and trade tensions, economic and geopolitical uncertainties, and continued supply chain constraints”.
The group said it will remain vigilant and closely monitor developments so it is able to react swiftly to market conditions.
It also noted that shifts in global passenger and trade flows may create new opportunities for the group due to its “well-diversified global passenger and cargo network”.
“While global uncertainties remain, the Group is in a strong position to focus on profitability, while pursuing growth opportunities and ensuring long-term value creation for shareholders.”
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