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8 Quick Things Investors Should Learn About Singapore Airlines Ltd

Singapore Airlines Ltd (SGX: C6L) – or better known as SIA – is one of the cool companies which shares its earnings webcast (the link is here).

The full service airline carrier needs no introduction. SIA also owns a majority stake in Tiger Airways Holdings Limited (SGX: J7X); the latter is also considered a subsidiary of the former. You can read more about SIA here.

What’s the story?

Below are eight useful things I learned from listening to SIA’s fourth quarter earnings webcast for the financial year ended 31 March 2014 (FY14/15):

  1. Speaking of the parent SIA division: Stephan Barnes, Senior Vice President for Finance, started the conference call with a little history lesson. Barnes noted that the cent per pax-kilometer (PKM) was hovering around the 11.5 cents mark for the second half of FY14/15, higher than where it was in the first half of FY14/15 – indicating that SIA was able to derive more revenue per customer. To add to that, he also said that passenger unit cost also came down by 2.2% for the past financial year. This development in lower passenger unit cost was down to lower fuel costs. The combination of higher revenue together lower cost meant that SIA had a passenger breakeven load factor of 79.5%.
  2. Unfortunately, the improvement in the cent per PKM was not enough to offset the reduction in traffic. For FY14/15, revenue for the parent SIA division reduced by $61 million compared to the prior financial year.
  3. As my colleague Stanley has noted, the annual passenger unit cost for the SIA parent division dropped by 2.2% year on year to 8.9 cents per available seat kilometre (ASK). On an ex-fuel basis, unit costs were unfortunately up 1.2%. As such, we can see that fuel cost drove most of the cost reduction for the financial year. For the full financial year, unit fuel cost made up 3.7 cents per ASK of the 8.9 cents per ASK or 41% of the total unit cost. This observation shows the significant role fuel costs play in the unit cost for the SIA parent division.
  4. Over the coming financial year, the SIA parent division plans to take on nine new aircrafts while decommissioning eight aircrafts. Goh Choon Pong, Chief Executive Officer for SIA said that it was an aggressive renewal program to make the fleet more efficient. Meanwhile, its Scoot division will almost double its fleet to 11 aircrafts while Silkair will see a net addition of two aircrafts over the same period. The exception would be Tiger Airways which will reduce its fleet by one aircraft as part of its consolidation.
  5. As part of the outlook for the future, Goh first pointed towards an immediate concern: the weaker Japanese Yen may have diverted outbound tourists from China to Japan – instead of South East Asia. Goh also highlighted several structural challenges in the horizon – including building its network and improving its products and services.
  6. On increasing its network, SIA is looking to deepen its code share network with SilkAir. This increases flights out of Singapore to close to 1,100 flights per week for SIA and SilkAir. Including codeshare partners, the airline carrier would make about 8,081 flights per week.
  7. On improving its product, SIA introduced new premium economy seats, launched new mobile apps and upgraded its lounges in Hong Kong and London. Its digital strategy may prove to be important as SIA looks to pool together customer information to allow better integration between different customer touchpoints.
  8. Finally, segments of the group portfolio for SIA can be best displayed in the chart below:

2015-06 SIA Group Portfolio

Source: SIA’s earnings presentation

Foolish takeaway

To buy and hold for a company for the long term also means keeping up with developments in the company.

The access to management teams via webcast gives the Foolish investor a fair chance to judge for themselves on whether they would like to be invested alongside the management teams that they have chosen. It also helps us put together a more complete thesis around the company and keep up with developments in its industry.

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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 Chin Hui Leong doesn't own shares in any company mentioned.