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The Business Times
Published May 17, 2013
SIA in the black for Q4, but operating loss widens

Group posts net profit of $68.3m and operating loss of $44.2m in Q4

By Joyce Hooi

AS Singapore Airlines (SIA) celebrates turning 50 today, it will do so on the back of a mixed-bag year.

Yesterday, even as the airline group announced that it was in the black for the fiscal fourth quarter, its operating loss widened as Middle Eastern carriers and low-cost players encroached on its airspace.

For the quarter ended March 31, 2013, the group reported a net profit of $68.3 million, against a net loss of $38.2 million in the preceding financial year's fourth quarter. This time around, its bottom line was boosted by a $54.7 million gain on the disposal of aircraft, spares and spare engines.

Even so, the red ink deepened in shade on the operating front, increasing from a loss of $5.2 million a year ago to $44.2 million during the quarter.

The group's operations were hemmed in by revenue, which dipped one per cent to $3.67 billion, as well as expenditure, which inched up $500,000 to $3.71 billion.

For the full year, the group posted a net profit of $378.9 million, up 12.8 per cent from $335.9 million a year ago, boosted by non-operating items which included a higher net interest income. Revenue stood at about $15.1 billion, up from $14.86 billion, close to the expected $15.178 billion based on Bloomberg consensus estimates.

In turn, operating profit for the year came under pressure, falling 19.8 per cent to $229.2 million, which the group attributed to high fuel prices and lower yields.

During the year, passenger yields fell even as passenger carriage grew, driven lower by promotional activities prompted by intense competition and the depreciation of revenue-generating currencies against the Singapore dollar, the group said.

The financial year was particularly unkind to SIA Cargo, the only company in the group to post an operating loss, and one that widened year-on-year at that, from $119 million to $167 million.

The group noted that during the year, cargo revenue continued to suffer from a contraction in both loads - which fell 6 per cent - and yields, which fell 4.3 per cent .

For the 12-month period, the parent airline company was the only one to turn in operating profit that was higher - $187 million, up from $181 million.

SIA Engineering's operating profit came in lower at $128 million from $130 million the year before, while SilkAir's profit slipped from $105 million to $97 million.

The group warned of a bumpy ride ahead, yesterday. "Forward passenger bookings for the next few months are almost flat compared to the same period last year. Yields are likely to remain under pressure amid weak economic sentiment, and revenues will be further diluted if key revenue-generating currencies continue to depreciate against the Singapore dollar," it said.

"The cargo business faces an additional issue of overcapacity in the market, which will add pressure on loads and yields. Furthermore, fuel prices remain persistently high."

Group earnings per share for the year stood at 32.2 cents, up from 28.3 cents previously. For the quarter, earnings per share stood at 5.8 cents, compared to a loss per share of 3.2 cents during the corresponding period a year ago.

A final dividend of 17 cents per share has been proposed, up from the 10 cents declared a year earlier. SIA paid out an interim dividend of six cents per share earlier in the year, bringing the total dividend to 23 cents per share.

This is three cents higher than the total dividend of the previous financial year.

The group's counter closed five cents higher at $11.45 before the release of its earnings yesterday.
Quote:Group posts net profit of $68.3m
A final dividend of 17 cents per share has been proposed, up from the 10 cents declared a year earlier.
If i could manipulate you only can read only these 2 lines and some others non-essential reports, i think you may rush to buy this stock.
Wonder if this news benefits SIA or SIA Engineering more? Tongue

The Straits Times
Published on May 31, 2013
SIA buying 60 mid-sized jets in $21b mega deal

By Jermyn Chow

SINGAPORE Airlines will spend US$17 billion (S$21.4 billion) to buy 60 new mid-sized jets, making it the biggest announcement of aircraft orders in the airline's history.

The deal is for 30 Airbus 350s and 30 Boeing 787s, with deliveries starting from 2016 till 2018.

The A-350 can carry about 310 passengers in three classes, while the Boeing 787-10x has a capacity of 320.

The latest buy outstrips SIA's previous mega deal just seven months ago, when it bought 25 planes worth US$7.5 billion.

SIA said in a statement yesterday that the deal with Airbus includes an option to purchase 20 more planes in addition to the 30 firm orders. The options can be converted to firm orders for bigger A350-1000s, it added.

But the new order for the B787-10x is subject to Boeing deciding to go ahead with the project, SIA said.

Both Airbus and Boeing aircraft, touted as fuel-efficient jets, will be used for medium- and long-haul routes, said SIA.

The new aircraft orders ensure that the airline retains its "industry leading position" and demonstrate SIA's commitment to Singapore as an air travel hub and "our confidence in the future for premium full-service travel", said SIA chief executive Goh Choon Phong.

He added that the new planes will allow SIA to "grow and renew our fleet and enhance our network, benefiting customers by offering more travel options and the latest in-flight cabin products".

The Straits Times understands that its next-generation first-, business- and economy-class cabin products, which were first announced last August, will be unveiled in July.

SIA is battling increasing competition from Middle Eastern premium carriers and regional budget airlines, which have grown in number. Like other airlines, its net profit has also been hurt by the global economic slowdown.

Although it reported a net profit of $68.3 million for the three months to March, its operating loss widened to $44.2 million in the fourth quarter.

Mr Shukor Yusof, an aviation expert from Standard & Poor's Equity Research, said: "It's clear SIA isn't changing its business model any time soon. On the contrary, it is responding aggressively to the challenge posed by Gulf carriers with these orders."

UOB Kay Hian's aviation analyst K. Ajith said the announcement is timed to allow SIA to retire its older B-777s and release the Airbus 330s that have been on lease due to the delayed delivery of the A-350s. He added that SIA's latest buy also demonstrates the airline's confidence in Asia's growing travel demand.
Singapore Airlines (SIA) launched its new advertising campaign recently. Given SIA’s stature as one of the top homegrown brands, it attracted lot of comments in the local media.

Branding experts and frequent travellers had a field day discussing the merits and the demerits of the new campaign. Some felt that SIA should be moving away from its traditional focus on the Singapore Girl.

To be clear, Singapore Airlines branding strategy which revolves around its service crew has served it well over the years. However, the best brands never start out with the intent of building a great brand. Instead, they first focus on building and delivering a profitable product or service and an organisation that can sustain it.

Towards this end, SIA has invested in the latest aircrafts, technology and processes. But very early on, SIA realised that it needed quality people to differentiate its offering. So it has invested in attracting and engaging the right cabin crew.

Savvy employers have learned that securing talent requires a compelling and differentiated employer brand that goes well beyond core salary and incentives. This includes learning and development opportunities. Here is where SIA scores.

Even though learning and development are key areas in service industries, SIA remains the airline with the strongest focus on this aspect. Its development programmes for newly recruited cabin crew are reported to be the most comprehensive in the industry.

SIA trains its fresh recruits for four months—twice as long as the industry average of eight weeks. Since SIA recognises that it’s in the business of selling experiences, its programmes cover not only safety and functional issues but also include courses on deportment, etiquette, wine appreciation and cultural sensitivity.

The cabin crew is trained to interact with Japanese, Chinese, and American passengers in different ways. They learn to appreciate subtle issues, such as communicating at eye level rather than “talking down” to passengers.

These programmes enable cabin crew to provide gracious service reflecting warmth and friendliness while maintaining an image of authority and confidence. (Sources: “Singapore Airlines’ Balancing Act”, Harvard Business Review. Loizos Heracleous and Jochen Wirtz, July 2010; Flying High in a Competitive Industry: Cost-Effective Service Excellence at Singapore Airlines, McGraw-Hill Education. Jochen Wirtz, Loizos Heracleous, and Nitin Pangarkar.)

Prospective cabin crew know that a career with SIA will equip them with these critical skills---skills which will keep them in good stead for many years in an increasingly globalised world. There are many examples of cabin crew pursuing successful careers in customer relations, marketing, PR, etc. even after they complete their contracts with SIA.

This is the brand promise their prospective employees are buying into. Many educated bright young people around the region apply to SIA due to this perceived value. By being SIA’s icon of quality and its most visible face in its marketing campaigns, the Singapore Girl also increases this perceived value of its employer brand.

To be effective, a company’s employer brand needs to be in alignment with its customer facing brand. The Singapore Girl does a great job of bringing this alignment in the minds of its prospective employees. Earlier in April this year, SIA was named Singapore's best employer brand for the second consecutive year by an independent agency.

As the war for talent increases in an uncertain economic environment in Asia, SIA will do well to continue to stick with the Singapore Girl as a key component of its brand strategy, despite what its detractors might suggest. The gracious Singapore Girl may well be helping SIA to win not only customers but attract high quality talent as well.

The views expressed by the author are his own and do not necessarily reflect the views of his employers.

Maneesh Sah
Maneesh is a regional marketing director for a global professional services company and also the Asia Pacific advisory board member in Chief Marketing Officer (CMO) Council. He has lived in Singapore for over 10 years, has travelled extensively across Asia, the Pacific and the Middle East and contributed to the success of many diverse teams in the B2B space. In 2011, he received Brand Leadership Award for Excellence in Branding & Marketing conferred by CMO Asia.

I like SIA. I used to work in related field and amongst the world players, SIA has always been the trendsetter and airline to beat.
They are money pinchers and extremely prudent. Bad for vendors but extremely good for its investors.
Its true that not alot of airlines can make money. In fact, alot of them are burning the countries' money, as most of them are state owned.
It must be remembered that although there are numerous budget airline encroaching on their core business, SIA has got alot of interest in them as well.
Tiger, Virgin Atlantic, Scoot and to a certain extent Silkair. Now with TATA in the frame, I don't think they are giving alot away to competitors.
In fact, it must be said that more people are flying than ever. The market is not shrinking, it is expanding.
People in our region who flies SIA, will fly SIA. Some even swore to fly SIA only.... just ask the rich Indonesians and Indians.
And there are those that fly business class for work, guess who they choose.
I forsee flying will be alot more like taking buses (albeit expensive ones) down the road.
With Asean open skies coming up in 2015, I think, the upside potential is huge.
It is unfortunate that the oil prices keeps going north and to me that is probably the only thing that held SIA's revenue back.

I am not vested and this is just a business perspective, not an investment perspective.
From an investment perspective, i dislike SIA. Looking at its capex just frightens me. Its profits is closely dependent on the oil price. If oil price goes up, it may have difficulties raising fare prices because it has many dumb competitors. The rich indo and indians may swear to fly SIA only but it seems not to add signifcantly to the bottomline.

From events in the past decade, the pilots seem to have a strong union. i remember there was once LKY has to step in to stop the union's demands or something to that effect. What happens when lky is no longer around... SIA may not be able to cut cost effectively with a downturn in the future

bad business overall...
Definitely a capex intensive business no doubt.
It always amazes me, how they manage to make money when so many airlines simply can't.
Given that we do not have any domestic market at all, this is quite an achievement.

That aside, gulf airlines and regional airlines are all improving their software and hardware, if not already have.
That is another challenge that SIA has to manage as well.
Especially the gulf states, their rise is simply stratospheric.
There are also numerous complains from competing airlines that the states are subsidising their fuel.
Although they deny, the complains simply did not go away.

It is tough to be in SIA's shoes, but they somehow has been weathering the storm.
In the midst of this, the management I must say have acquitted themselves pretty well.

They do have a strong union. But I think the message from LKY is pretty clear, and I believe the management will carry out the orders if this happens again.
I don't think they are in a bad business, just a bad cycle.
But management is well poise to handle the cycle I believe.
SIA gets India Approval for airline with Tata

SINGAPORE -- Singapore Airlines said Monday it has received approval from India’s Foreign Investment Promotion Board to establish a joint venture airline in India with Tata Sons, the Dow Jones news agency reported.

The Singapore flag carrier signed a deal in September with the Indian conglomerate to establish a full service carrier in India, in which it will own 49 per cent.

The two partners now need approvals from the Directorate General of Civil Aviation in India to start operations.
SYDNEY: Embattled Australian carrier Qantas' credit rating was downgraded by Standard & Poor's to "junk" status Friday after the airline issued a shock profit warning and slashed jobs.

Qantas on Thursday flagged a half-year loss of up to A$300 million (US$271 million) and said it would axe 1,000 jobs as it struggles under the weight of record fuel costs and fierce competition from subsidised rivals.

In response, S&P lowered the airline's rating from BBB-, the lowest investment grade, to BB+ and placed it on a creditwatch with negative implications.

That puts Qantas in what is known as "junk" status among professionals, increasing the cost of financing for the carrier and restricting access to investors that do not put their money in lower rated companies.

"The downgrades reflect our view that intense competition in the airline industry has weakened Qantas' business risk profile to 'fair' from 'satisfactory', and financial risk profile to 'significant' from 'intermediate'," S&P said in a statement.

"We don't expect Qantas to recover to a credit profile commensurate with a 'BBB-' rating in the near term."

The move comes after another ratings agency, Moody's, on Thursday put the airline's investment-grade Baa rating on review for a potential downgrade, saying the forecast conditions were "outside the rating expectation".

Qantas chief executive Alan Joyce on Thursday said the challenges facing the airline were "immense".

"Since the global financial crisis, Qantas has confronted a fiercely difficult operating environment -- including the strong Australian dollar and record jet fuel costs, which have exacerbated Qantas' high cost base," he said.

"The Australian international market is the toughest anywhere in the world."

As well as axing 1,000 jobs, Joyce said he would take a 38 per cent pay cut while the airline would conduct a review of spending with top suppliers and put in place a salary and bonus freeze.

Qantas chief financial officer Gareth Evans said the downgrade was not unexpected.

"It highlights the unprecedented pressures that the Qantas Group is facing from several external forces but particularly from an uneven playing field in the Australian aviation market," he said.

The airline claims domestic rival Virgin Australia, which is majority-owned by state-backed Singapore Airlines, Air New Zealand and Etihad, is waging a campaign to weaken it in the lucrative domestic market with cheap seats underwritten by foreign cash injections.

Joyce has been lobbying the government for the easing of restrictions that limit foreign ownership in the national carrier to 49 percent, or state intervention to shore up Qantas.

Despite the downgrade, Evans said Qantas retained a strong financial position, including a large cash balance and a significant asset base.

"The cost cutting and structural review we announced yesterday is aimed at leveraging these strengths to ensure the Qantas Group continues to deliver for its shareholders and customers," he said.

"It remains business as usual across the Qantas Group."

An update on the structural review is expected in February, prompting speculation a sell-off of its Jetstar assets in Asia could be on the cards.

- AFP/ac
SIA cuts flying years: Captains to stop at 64, first officer at 62 - ST by Karamjit Kaur

Last month SIA reported that revenue was flat at $3.87 b for 3 month to Dec 31.

SIA has turned towards opportunities in regional market and low-cost travel sector. Scoot has also started to operate long haul budget flight.

It also plan to launch a new carrier in New Delhi with Tata.

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