Singapore Airlines Reports Profit Pressure as Air India Continues to Hurt Earnings

Due to ongoing difficulties at Air India Ltd, Singapore Airlines Ltd's net income fell to its lowest level in three and a half years in the second quarter. In the three months ending September 30, net income dropped 82% from the same period last year to Singapore dollar 52 million ($40 million), while revenue increased 2.2% to Singapore dollar 4.9 billion, the carrier announced on November 13.

Operating profit for the quarter increased by almost 23% to $398 million. The financials of Air India, in which SIA Group owns a 25.1% share, continued to suffer. According to Singapore Air, the Indian carrier's losses were reflected in its first-half share of related companies' profits, which was 417 million Singapore dollars lower than it was in the same period last year.

Air India Still Reeling from a Fatal Crash

According to a Bloomberg News story last month, Air India is still in shock over a deadly crash earlier this year and is requesting at least INR 100 billion ($1.1 billion) in financial support from its owners, Tata Sons Pvt. and Singapore Air. In order to support Air India's turnaround plan, SIA stated that it is dedicated to collaborating with Tata Sons. Passenger yields, a measure of flight profitability, decreased by 3% to 9.8 Singaporean cents per km on a group level.

Following the shutdown of smaller rival Jetstar Asia throughout the fiscal term, the yield decline continued to decelerate, indicating a stronger competitive picture. While fuel prices decreased throughout the quarter, SIA also benefited from expenses remaining largely unchanged. Even though the airline's net profit dropped for the third straight quarter and it faced supply chain limitations, economic difficulties, and geopolitical uncertainties, it maintained an optimistic view. According to the airline, demand for air travel is still strong going into the third quarter.

SIA’s Performance this Year

In the quarter, SIA Group carried a record 10.5 million passengers. Due to high demand, SIA, the flagship airline, and Scoot, the bargain division, both saw fuller flights as they expanded their capacity. Through September, Scoot maintained its impressive performance, with load factors surpassing 90% for six months in a row. The company is likely experiencing gains due to the cessation of Jetstar Asia's services in July, as it, along with SIA, has absorbed the market share previously held by the competitor.