Singapore Airlines (SIA) experienced a significant drop in its share price following a stark decrease in profits for the first half of the fiscal year. The airline’s net profit plunged by nearly 50%, citing increased competition and lower yields as the primary reasons.
Market Reaction
As the markets opened, SIA shares fell by 6.2% but later recovered slightly to settle at a 3.57% loss. This decline reflects investor concerns over the airline’s decreasing profitability despite a slight increase in revenue.
Financial Performance
For the April to September period, SIA’s net profit was reported at 742 million Singapore dollars ($559.12 million), down from SG$1.44 billion the previous year. Operating profit also saw a decline of 48.8%, while revenue rose by 3.7% to SG$9.5 billion. Despite these challenges, SIA maintained an interim dividend of 10 Singapore cents per share.
Challenges and Strategy
The airline attributed the profit drop to “increased capacity and stronger competition in key markets.” SIA’s Chief Commercial Officer, Lee Lik Hsin, acknowledged the global competition, with many airlines restoring pre-Covid capacity levels. Despite a 7.9% increase in passenger traffic, passenger capacity expanded by 11%, leading to a reduction in the passenger load factor.
Future Outlook
SIA remains committed to expansion, with plans to continue increasing capacity. The company also announced a SG$1.1 billion cabin retrofit program for its Airbus A350 fleet, expected to be completed by 2030. While the demand for air travel is anticipated to stay robust, SIA recognizes the competitive challenges ahead.
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