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How Did Singapore Airlines Ltd Fare In Its Latest Quarter?

Singapore Airlines Ltd. (SGX: C6L), the flag carrier of our nation, released its second quarter earnings results on Thursday evening. Let’s take a look at some of the important points.

For the quarter ended 30 September 2014, revenue edged up slightly to $3.91 billion from S$3.90 billion in the previous year. However, net profit was down S$70 million, or some 44% year-on-year, to $90.9 million, due mainly to weaker results from associated companies. The poor showing from Singapore Airlines’ associates were partly offset by higher operating profit, and higher gains on disposal of aircraft, spares, and spare engines.

For the six month period, revenue declined 2% year-on-year to $7.6 billion, mainly attributable to “lower incidental revenue stemming from reduced compensation pertaining to changes in aircraft delivery slots, “ and  the expiry of aircraft leases to Royal Brunei Airlines, which led to lower income from the lease of aircrafts.

Net profit plunged 55.5% year-on-year to S$125.7 million. The decline in net profit was mainly due to a S$154 million fall in the share of results of associated companies, largely attributable to Singapore Airlines’ share of the losses suffered by the low-budget carrier Tiger Airways Holdings Limited (SGX: J7X). Singapore Airlines is currently the majority owner of Tiger Airways.

Singapore Airlines’ passenger carriage, which is the number of passengers carried multiplied by distance flown in kilometres (known as revenue passenger-km), increased slightly by 0.1% in the first half of the company’s financial year. Passenger capacity, which is the number of available seats multiplied by distance flown in kilometres (known as available seat-km), dipped 0.2%. Consequently, the passenger load factor (revenue passenger-km divided by available seat-km) improved to 79.8%.

The airline is declaring an interim dividend of 5 Singapore cents per share, a huge decline from the 10 cents in dividend dished out in the corresponding period a year ago.

As of 30 September 2014, the company operates a fleet of 105 passenger aircraft, with the majority of them being Boeing 777s. The fleet has an average age of 7 years.

The firm said that the operating landscape for the airline industry remains competitive and challenging, with demand generally flat. Passenger yields will remain under pressure due to keen competition from other airlines and promotional activities in weaker markets. However, there has been some relief as fuel prices have declined in recent months. In the US, lower fuel prices have been very kind for some airlines, giving rise to record profits. Having said that, SIA cautioned that there has been concerns that “the decline [in fuel price] reflects a slowdown in major economies in the world which could ultimately hurt travel demand.”

Meanwhile, Singapore Airlines’’s aircraft maintenance arm, SIA Engineering Company Limited (SGX: S59), released its second-quarter results on Tuesday. Revenue fell 3% while net profit dropped 41% to S$42 million.

Shares of the airline closed at S$10.15 on Thursday.

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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 contributor Sudhan P doesn’t own shares in any companies mentioned.