Profits Plunge, But SIA Still Makes Money in 2001.

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Author: Dennis, William

The airline recession, repercussions from the terrorist attacks in the U.S. and poor overseas investments all contributed to a 61% drop in net profits to S$631.7 million (US$341 million) for Singapore Airlines (SIA) for the year that ended Mar. 31.

Still, the fiscal 2001â€"02 results posted last week beat the highest forecasted results by more than 60%.

Group revenues were off 5.1% to S$9.95 billion, with the decline attributed to weak passenger and cargo marketsâ€"airline-only revenues fell S$426 million while cargo was off S$82 million. The group took a S$266.9-million write-off of its investment in Air New Zealand and a NZ$350-million (US$166-million) loss from the collapse of Ansett Australia. It also had a S$46.7-million loss from associated joint ventures, including a share of losses in Virgin Atlantic, in which Singapore Airlines holds a 49% stake.

The collapse of Ansett caused SIA's share in Air New Zealand, which controlled Ansett, to drop from 25% to a mere 4.5%. Deputy chairman and CEO Cheong Choong Kong said the setback of SIA's investment in Air New Zealand “is not going to deter us.” He said it had made the carrier “more resilient.”

Two bright spots were the performance of SIA Engineering Co. and Singapore Airport Terminal Services, which reported profits of S$87 million and S$72 million, respectively.

SIA's regional subsidiary, SilkAir, helped by a change in its aircraft depreciation rate, posted a S$17-million profit, compared with a loss of S$6 million in 2001.

SIA Senior Executive Vice President Michael Tan said passenger and cargo load factors had recovered since Sept. 11 and stood at 74% and 68%, respectively. But heavy discounting has pushed down yields.

The carrier disposed of seven A340-300Es and the last of its two 747-300s. It took delivery of 14 777s (six -200ERs, six -200s and two -300s) and two 747-400s. Nine 747-400 freighters and six spare engines were transferred to SIA Cargo, when the business unit was created last July 1.

SIA officials see a general recovery of confidence in air travel. The carrier has restored most services it suspended after the Sept. 11 attacks; others are to be restored by the end of June. New services include a flight to Las Vegas via Hong Kong as of Aug. 2.

While the passenger market, particularly for leisure travel, is expected to improve, yields are not because capacity is said to be too high.

(Singapore dollars)

                              Fiscal 2002          Fiscal 2001

Revenue                    $9.450 billion        $9.95 billion

Pretax Profit               925.6 million        1.90  billion

Net Profit                  631.7 million        1.62  billion

Earnings/share[a]                  $0.519                $1.33

(S$1.80 = U.S.$1)

a Fully diluted

Source: Singapore Airlines

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By William Dennis, KUALA LUMPUR