Singapore Airlines net profit plunges

SINGAPORE — Singapore Airlines (SIA) said Wednesday its financial first quarter net profit plunged 71.4% from the previous year, weighed down by lower passenger and cargo revenue.

Net profit in the three months to June came in at S$34.8 million (892 million baht), down from S$121.8 million in the same period last year, the national flag-carrier said in a statement.

Group revenue fell 4.1% to S$3.68 billion.

"Passenger revenue declined year-on-year on the back of weaker yields amid intense competition, and unforeseen events that depressed travel demand in some key Asian markets," it said.

The airline said revenue from its freight arm SIA Cargo also fell "as the airfreight market continued to be affected by excess capacity".

It added that losses from associated companies, in particular budget carrier Tiger Airways, contributed to the decline in net profit.

"The outlook for the air transportation industry has become more challenging with continuing uncertain global economic climate, geo-political concerns in the region and elevated fuel prices," it said.

"Aggressive fares and capacity injections from competitors will continue to place pressure on yields," it added.

SIA has faced stiff competition from Middle Eastern and Asian carriers, as well as Asia's growing ranks of budget airlines.

The airline said it is "targeting specific product segments and traffic lanes" to boost the performance of SIA Cargo.

"Overcapacity in the market will continue to impact the cargo business, notwithstanding a slow recovery in demand," it said.

The freight arm currently operates a fleet of eight Boeing 747-400s, while the parent airline runs 103 passenger aircraft including 19 Airbus A380 superjumbo jets.

SIA did not specify what unforeseen events had caused a drop-off in passenger revenue in certain markets.

But the mysterious disappearance of Malaysia Airlines Flight MH370 on March 8 while on a flight from Kuala Lumpur to Beijing has hurt the arrival of Chinese tourists to Malaysia and Singapore.

Most of the 227 passengers on board were Chinese nationals. The aircraft has yet to be found, although it is believed to have gone down in the Indian Ocean after inexplicably diverting from its flight path.

Official data from Singapore's tourism board showed a 27% decline in passenger arrivals from China in the five months to May, compared to the same period in 2013.

Tourism experts have said Chinese visitors are staying away from Malaysia due to a deep-set cultural aversion for anything associated with death, which would in turn affect arrivals to neighbouring Singapore.

Chinese tourists usually visit both countries as part of large tour groups.

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