Three Things To Like About Singapore Airlines

SIALogoWe all know, or at least I think all we know, that airlines are generally not the greatest of investments.

Airlines are prone to something known as high operational gearing. It’s not their fault. It’s just something that is built into the DNA of the industry.

Thing is, flying a plane is an expensive business. To generate a profit, airlines need to get as much payload onto the plane before it takes off. The payload could be in the form of cargo in the hold; passengers in the cabin or add-on services that are sold during the flight.

Not all airlines can do that reliably, though. Thai Airways (SET: THAI) has made losses in two out of the last three years. Qantas (ASX: QAN) made a bottom-line loss in 2012. Last year, the Australian flag-carrier barely broke even. Japan’s ANA Holdings (TSE: 9202) has been unprofitable in five out of the last 13 years.

However, Singapore Airlines (SGX: C6L) has managed to deliver a bottom-line profit for about as long as my records will allow me to go back. Since 1989, SIA’s bottom-line has been in the black. That is the first thing to like about the airline – it has been consistently profitable. Prudent management has enabled SIA to generate revenues over and above expenditure for the last 24 years.

A positive, though not necessarily increasing, bottom line has allowed SIA to reward shareholders with a regular payout. Since 1997, when SIA paid its first dividend, the airline has distributed a portion of its profits with shareholders. That is the second thing to like about SIA. It puts shareholder interest high on its financial agenda.

The third thing to like about Singapore Airlines is its wide geographic spread. As an international operator of airline services, SIA generates revenues from different parts of the world. East Asia accounts for over a third of total revenue, while Europe accounts for about a-tenth. South West Pacific is another significant source of revenue for the company. It represents about a-twelfth of annual sales.

There is a fourth thing to like about SIA – its impressive list of awards for customer service. Warren Buffett once said told managers to “Focus on your customers and lead your people as though their lives depend on your success“. It looks as though Singapore Airlines might be doing that already.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.