Singapore Airlines announces reintegration of SIA Cargo as group division

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The airline expects to take delivery of ten A350-900s and three A380-800s during the 2017-18 financial year, and remove two A330-300s, four A380-800s, two 777-200s and one 777-200ER from the fleet, again as leases expire.

It reported a S$132m hit to net profit relating to a European anticompetition ruling against its cargo unit, which had been previously announced.

The full year result was hurt by a fourth quarter loss of S$126 million, compared with net profit of S$234 million a year earlier.

Looking forward, the carrier says it is braced for intense competition arising from excess capacity in major markets, alongside geopolitical and economic uncertainty, which continue to exert pressure on yields.

"The size of the loss is quite staggering for the three months and it would indicate that SIA would need to do something drastic and radical to overcome its difficulties in the coming years", he told AFP.

SIA said the new aircraft would enable the group to expand its network and boost competitiveness in both the full-service and low-priced segments. SIA, which is under pressure from regional discount carriers and Middle-Eastern rivals, said in February that 2017 will be a challenging year as passenger and cargo yields - a key measure of profitability - remain under stress.

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The move is not expected to have a material impact on its financial performance in the 2017/18 financial year, the airline said.

Nevertheless, strategic policies to address structural changes are starting to demonstrate positive results, it added. "Building on this foundation, the next phase of the SIA Group's transformation has been launched".

The re-integration is expected to be completed in the first half of 2018.

Singapore Airlines, or what SIA calls the Parent Airline Company, suffered a 20.4 per cent drop in operating profit to S$386 million. The carrier's load factor fell marginally to 79 per cent as capacity cuts lagged passenger falls.

Besides a weaker operating profit (-$58m), SIA says the deterioration in group net profit was largely attributable to SIA Cargo's provision for competition-related matters (-$132m) and absence of a refund received past year (-$117m). Cargo revenue was also down S$87 million on the back of cargo yield erosion, notwithstanding higher freight carriage.

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