SIA has forecasted it will face the full impact of rising fuel costs in the upcoming fiscal year.
Singapore Airlines aircraft at Singapore's airport. Airlines worldwide are grappling with the challenge of increasing fuel expenses.
Summary For the fiscal year ending in March, SIA achieved a record annual revenue of SGD 20.52 billion. However, its net profit plummeted by 57% to SGD 1.18 billion.
SIA's annual revenue hit a historic high, ending a three-year streak of record profits with a significant decline in earnings. Compounded by the shadow of Middle East conflicts, uncertainty in the industry outlook has intensified further.
Airlines globally are deeply entrenched in the predicament of rising fuel prices, potentially incurring billions in additional expenses this year. This forces carriers to curb escalating costs by raising ticket prices and cutting routes.
Since the outbreak of hostilities in the Middle East in late February, SIA's stock has fallen over 12%, underperforming Singapore's benchmark stock index, which has since recovered its losses. Uncertainty persists in the aviation sector, with fuel prices remaining elevated and regional airspace operations continuing to face disruptions.
The Singaporean national flag carrier stated on Thursday that the most immediate impact of the conflict has been a doubling of jet fuel prices compared to pre-conflict levels. It anticipates bearing the full brunt of high fuel costs in the next fiscal year.
SIA, which also operates the low-cost carrier Scoot, has already increased ticket prices across its entire network. However, the airline acknowledged that fare hikes are insufficient to offset the pressure from rising aviation fuel costs, which constitute its largest single expense item.
Over the past 12 months ending in March, SIA's net profit decreased by 57% to SGD 1.18 billion.
This is approximately USD 927.5 million, surpassing the SGD 1.075 billion expected by analysts surveyed by Visible Alpha.
Reasons for the profit decline include: the non-cash accounting gain of SGD 1.1 billion from the merger of Air India and Vistara in November 2024 was not recognized in this period. Additionally, associated companies swung to a loss, recording a deficit of SGD 846 million, primarily dragged down by losses from its 25% stake in Air India.
Full-year revenue increased by 5.0% year-over-year to a record SGD 20.52 billion. Robust air travel demand, improved passenger yields, and lower net fuel costs during the period drove operating profit up by 39% to SGD 2.375 billion.
Lower average oil prices during the period and increased gains from fuel hedging reduced net fuel costs. However, cargo revenue declined by 2.1% compared to the previous year.
Prior to the earnings release, analysts were optimistic, suggesting that the diversion of passenger traffic from Middle Eastern carriers to other regions like Asia could support SIA's passenger volumes.
Passenger traffic at Singapore's Changi Airport grew by 8.5% year-over-year in March, following a 1.8% increase in February. In January, traffic had decreased by 3.0% year-over-year. The airport noted strong travel demand between North Asia and Europe in the first quarter, boosting overall passenger performance.
SIA stated that the duration and subsequent evolution of the Middle East situation could further impact global supply chains and the macroeconomic environment, thereby altering travel demand patterns.
