SINGAPORE (July 27): Singapore Airlines (SIA) shares fell by as much as 5.5% on Friday, their biggest one-day drop in over a year, after the carrier reported a lower than expected first quarter profit the day before, driven by a decline in airfares.

Analysts were cutting their forecasts for the remainder of the year following a 3.2% decline in first-quarter passenger yields, a proxy for airfares, which bucked expectations for a rise that was seen in the broader global airline industry.

"Passenger yields could remain under pressure given SIA Group's more aggressive capacity expansion this year, especially on long-haul routes to Europe and North America," said Corrine Png, CEO of transport research firm Crucial Perspective.

Singapore Airlines shares fell by as much as 5.5% on Friday versus the broader local index that was 0.3% lower.

The airline earned $140 million in the three months ended June 30, down 59% from a revised figure of $338 million a year before, it said after market on Thursday.

The prior-year figure was restated due to accounting changes and had included $175 million of one-off benefits from changes to its frequent flyer programme accounting and compensation for aircraft delivery slots.

Mohshin Aziz, an analyst at Maybank, said increased airport charges at the airline's Singapore hub from July 1 could further exacerbate pressure on yields, especially for short-haul flights.

Yields at regional arm SilkAir fell by 10.3% in the first quarter. SilkAir faces stiff competition from budget carriers such as AirAsia Group Bhd and is poised to be merged into the parent brand after 2020.

At the parent brand, viewed as a benchmark for full-service carriers in the region, yields fell by 1%, whereas DBS analyst Paul Yong said he had expected a "mild improvement". In the fourth quarter last year, yields at the Singapore Airlines brand rose by 1% after a long period of quarterly declines.

Cargo yields rose by 9.9% during the first quarter, but volumes fell and Singapore Airlines warned the escalation of trade tensions could potentially have a longer-term impact on air cargo demand.

As at 1.12pm, shares in SIA are down 5.1% to $10.25.