Growth in carriage and yields for both passenger and cargo operations produced record revenue for Singapore Airlines Group of Sin$13,341 million for the financial year ended 31 March 2006, Sin$1,328 million (+11.1%) higher than in 2004-05. Group operating profit, however, fell Sin$104 million (-7.9%) to Sin$1,213 million as rising fuel costs pushed expenditure up. Expenditure increased Sin$1,432 million (+13.4%) to Sin$12,128 million.
Fuel accounted for 35% of the group’s expenditure, up from 25.2% a year ago. Net of hedging, fuel expenditure rose Sin$1,547 million (+57.5%) to Sin$4,240 million as jet fuel prices increased to an average of US$77 per barrel in 2005-06 from US$55 per barrel last year.
Excluding fuel, group expenditure was actually lower by 1.4%, reflecting the results of the collective efforts towards improved cost management, efficiency and productivity.
The group recorded a foreign exchange loss of Sin$137 million in 2005-06, compared to a gain of Sin$112 million the previous year. This was due to the strengthening of Singapore Dollar against the major revenue generating currencies, particularly the British Pound, Euro and Japanese Yen, partially offset by cost savings from US Dollar-denominated expenditure as a result of a weaker US Dollar. Compliance with several new and revised Financial Reporting Standards (FRS) that came into effect in financial year 2005-06 resulted in a net addition of Sin$279 million to profit after tax.
With this, and despite intense competition and the sharp rise in jet fuel prices, the group achieved a profit attributable to equity holders of the company of Sin$1,241 million for the financial year ended 31 March 2006, a decrease of Sin$112 million (-8.3%) from last year. The preceding year’s profit had also been boosted by gains totalling Sin$78 million from the sale of portfolio investments in Air New Zealand and Raffles Holdings.
The parent Passenger Airline Company achieved an operating profit of Sin$651 million (-6.7%). The company’s result made up 53.6% (+0.6% point) of the group’s operating profit. Contributions by the three major subsidiary companies to the group’s operating profit are as follows:
? Singapore Airlines Cargo (SIA Cargo): 14.3% (-5.5% points)
? Singapore Airport Terminal Services (SATS) Group: 15.2% (+0.4% point)
? SIA Engineering Company (SIAEC): 11.1% (+3.4% points)
Fourth Quarter 2005-06
The group achieved a profit attributable to equity holders of the company of Sin$266 million in the three months ended 31 March 2006, a decline of Sin$20 million (-7.1%) from the corresponding period last year.
Group revenue improved Sin$357 million (+11.8%) to Sin$3,389 million following strong traffic and yield growth for both passenger and cargo operations. Group operating profit at Sin$255 million, was however Sin$27 million lower (-9.6%), as the increase in expenditure outpaced revenue growth. Group expenditure increased Sin$384 million (+14%) to Sin$3,134 million due mainly to higher fuel costs. Continued focus on cost management has resulted in a 1.5% reduction in non-fuel expenditure during the period.
The number of passengers carried for the financial year ended 31 March 2006 was 16.995 million (+6.6%) - the highest ever achieved in the group’s history. SIA’s carriage of passengers (in revenue passenger kilometres) grew 6.6% while capacity (in available seat kilometres) rose 4.6%. As a result, passenger load factor improved 1.5 percentage points from a year ago to 75.6%.
Passenger breakeven load factor rose 1.5 percentage points to 70.8% as unit cost grew at a higher pace (+7.1%) than yield (+5.0%). Excluding fuel, passenger unit cost declined 10.2%.
SIA Cargo carried 7.4% more freight (in load tonne kilometres) than the corresponding period last year. As capacity growth (in capacity tonne kilometres) was 7.2%, cargo load factor rose 0.1 percentage point to 63.6%. Cargo breakeven load factor, at 60.9%, was 1.6 percentage points higher because unit cost grew at a higher pace (+10.3%) than yield (+7.5%). Excluding fuel, cargo unit cost increased 1.2%.
During the year, Singapore Airlines took delivery of one Boeing 777-300, bringing the B777 operating fleet size to 58. As at 31 March 2006, the operating fleet comprised 90 passenger aircraft - 27 B747-400s, 58 B777s and five A340-500s. The average age of the fleet was six years and four months.
Singapore Airlines expanded its network by five new destinations in 2005-06, namely Hyderabad (October 2005), Lahore and Karachi (February 2006), Moscow and Abu Dhabi (March 2006). In addition, frequencies were added to growth markets in Asia and Australia. As at 31 March 2006, Singapore Airlines passenger route network reached 63 destinations in 34 countries. SIA Cargo took delivery of two B747-400 freighters during the year, bringing its operating fleet to 16 freighters as at 31 March 2006.
A new, twice weekly, freighter service to Johannesburg was launched in July 2005. Additional services were mounted to Chicago and Copenhagen. As at 31 March 2006, SIA Cargo’s freighter network covered 37 cities in 21 countries.
The outlook for air travel is broadly positive. However fuel costs remain a significant challenge, with fuel price volatility a key variable in determining financial performance.
SIA’s travel bookings are projected to grow steadily on the back of improved economic prospects, particularly for Asia and Europe.
Singapore Airlines is gearing up to be the first to fly the all-new Airbus A380-800 and to introduce the Boeing B777-300ER by the end of the year. The company is expecting to take delivery of seven Airbus A380-800s and nine Boeing 777-300ERs, while five B747-400s will be de-commissioned during the year. The operating fleet will comprise 101 passenger aircraft by 31 March 2007.