Singapore Airlines (SIA) reported a decline in half-year earnings on Friday, impacted by intense competition and rising costs. However, the airline expects to record a S$1.1 billion ($832.45 million) gain once the Air India-Vistara merger is finalized. SIA also revealed plans to redeem all its outstanding mandatory convertible bonds (MCBs), totaling S$9.7 billion. For the six months, SIA’s revenue increased by 7.1% year-on-year to S$9.50 billion. However, passenger revenue fell by 6.6% due to expanded capacity, which led to a similar drop in yields. Cargo revenue also declined by 29.1%, though the drop was less severe, supported by stronger cargo demand, particularly due to security concerns in Europe.
In the first quarter of the financial year, SIA’s passenger traffic surged by almost double to 26.5 million. Its passenger load fell to 86.4% yoy from 88.3% a year earlier. Airline capacity expanded by 11.9 percent in the period, a sharp increase from pre-pandemic levels of only 79%.
However, SIA’s margins have been squeezed by a surge in fuel costs as the company continues to pay higher prices for oil. Non-fuel costs rose 13.7% yoy to S$5.75 billion as the airline raised ticket prices and boosted services on top of the average wage and rental increases.
Meanwhile, SIA’s costs have also been hit by higher staff salaries and a surge in maintenance expenses. Other costs have jumped as the group expands its fleet and launches new routes. The company has also started offering in-flight entertainment, which requires substantial capital outlay.
Passenger and cargo revenue declined with higher capacity, but a strong performance helped the company’s earnings in its long-haul business. SIA’s premium long-haul services are in high demand from corporate travelers and tourists, especially for flights to Japan, Australia, Europe, and the United States.
The airline also collaborates with luxury brands to curate unique experiences for its passengers. This helps differentiate the brand from rivals and provides passengers with a premium travel experience.
The merger between Tata Group’s Air India and Vistara, a joint venture between Singapore Airlines and Tata, will give SIA a 25 percent stake in the combined entity. This will allow it to tap into India’s burgeoning aviation market and boost its presence in Asia’s fastest-growing economy. The deal is expected to be completed by the end of November. Stay tuned to Skift for more insights on the latest developments in the world of travel. Sign up for our newsletter here to get the most important news. You can also follow us on Facebook, Instagram, and Twitter for the latest updates.
