Why Has Singapore Airlines Ltd’s Stock Price Fallen By 13% Over The Past Year?

Singapore Airlines Ltd (SGX: C6L) is the national airline of Singapore. Aside from its namesake full service airline, the company also owns other airline brands such as the full service carrier SilkAir and the budget carrier Scoot.

Singapore Airlines also owns a majority stake in SIA Engineering Company Ltd (SGX: S59), a company that specialises in providing aircraft maintenance, repair, and overhaul (MRO) services. SIA Engineering serves over 80 international airlines around the world.

Over the last 12 months, Singapore Airlines has seen its stock price fall by 13%. Why is that so?

Reasons for decline

There are many reasons why a company’s share price could fall. But, the reasons can generally be classified as business-performance-related, or investor-sentiment-related.

The former deals with how a company’s business has performed or is expected to perform. And in terms of business performance, one of the really important numbers would be the company’s profit.

Meanwhile, the latter is about the overall mood of market participants – are investors more greedy than fearful, more pessimistic than optimistic et cetera? In general, negative emotions (fear and pessimism) tend to drag down the prices of stocks while positive emotions (greed and optimism) tend to push up stock prices.

In the case of Singapore Airlines, it appears to be the former at work.

The case with Singapore Airlines

Here’s some figures to justify my point. In the six months ended 30 September 2016, Singapore Airlines’ revenue was down by 3.6% year-on-year. While the reported profit attributable to shareholders was up by 5.5%, the figure was actually boosted by a one-off gain of S$142 million stemming from SIA Engineering’s divestment of a subsidiary.

What’s next

So, SIA had actually suffered a weaker business performance overall. This may have led to the fall in its share price over the last 12 months.

Investors may also want to keep an eye on Singapore Airlines’ fuel costs in the future. The company has benefitted from the low price of oil in the past few quarters, which has helped lower its fuel costs. But, oil prices have actually started climbing recently and are currently around 20% higher than where they were in mid-November.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.