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How Does Singapore Airlines Ltd Make Money?

It is important to know what a particular company does and how it makes money before investing in it. Investing in a business without such knowledge is akin to travelling to an unknown territory without a map.

On that note, let’s check out what business Singapore Airlines Ltd (SGX: C6L) is involved in and how it generates its revenue.

Singapore Airlines, as many may already know, is Singapore’s flag carrier with its hub at Singapore Changi Airport. The Singapore Airlines group has other airline-related subsidiaries such as SilkAir, Budget Aviation, SIA Engineering Company Ltd (SGX: S59) and SIA Cargo.

Let’s take a look at the table below for the revenue contribution of each segment for the financial year ended 31 March 2017 (FY2016/17):

Source: Singapore Airlines Annual Report FY2016/17

Revenue from Singapore Airlines, which made up the bulk of revenue for FY2016/17, was S$11.09 billion. The parent airline company is involved in passenger air transportation under the Singapore Airlines brand, with a focus on full-service passenger segment serving short-haul and long-haul markets.

Revenue from SilkAir for the year was at S$990.3 million. This business segment provides passenger air transportation under the SilkAir brand, with a focus on full-service passenger segment serving regional markets such as China, India, Indonesia and Malaysia.

The Budget Aviation arm is involved in passenger air transportation under the Tigerair and Scoot brands, with a focus on the low-cost passenger segment. Tigerair was previously a listed company but has since been privatised. In the current financial year (FY2017/18), Scoot and Tigerair were merged under the Scoot brand name.

Moving on, SIA Engineering Company provides airframe maintenance and overhaul services, line maintenance, technical ground handling services and fleet management, among others. For more information about the company, you can head here.

SIA Cargo segment provides air cargo transportation and related activities while the “Others” segment aggregates services provided by the group, such as the training of pilots, air charters and tour wholesaling.

Now that we know the basics of Singapore Airlines Ltd’s revenue streams, we can then delve into other aspects of the firm such as its profitability, strength of its balance sheet, its cash-generating abilities and so on before deciding to invest in it.

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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.