SINGAPORE (July 31): SIA Group reported earnings of $111.1 million for 1Q19/20 ended June, 20.7% lower than a year ago.

The weaker bottomline was mainly due to higher share of losses from associate Virgin Australia despite an improvement in Vistara’s performance.

Correspondingly, earnings per share fell to 9.4 cents from 11.8 cents the previous year. 

1Q19/20 group revenue came in 6.7% higher at $4.1 billion as passenger flown revenue improved $271 million or 8.8%, led by traffic growth of 8.1%, on a 6.6% increase in capacity. Despite the significant capacity injection, RASK (revenue per available seat kilometre) improved 1.3%.

Cargo flown revenue declined $45 million or 8.4%, as both cargo yield and cargo load factor fell by 4.2% and 2.7 percentage points respectively due to weak cargo demand amid trade uncertainties.

Expenditure for the group increased 6.9% to $251 million to $3.9 billion. Fuel costs climbed 8.6% to $1.17 billion. The group says it continued to benefit from fuel hedging gains during the quarter. 

Segmentally, the parent airline company saw a 28.2% increase in operating profit to $232 million as strong revenue growth outpaced higher expenditure. Similarly, the SIA Engineering arm recorded 80% growth in profit to $18 million.

Conversely, SilkAir and Scoot recorded operating losses of $16 million and $37 million respectively. SilkAir was significantly impacted by the grounding of its six 737 MAX 8 aircraft during the period, while Scoot’s capacity growth was limited to 6.5% as a result of reduced aircraft utilisation during the period to improve operational resilience.

As at June 30, cash and cash equivalents stood at $2.1 billion.

In its outlook statement, SIA notes that air freight demand has softened amid ongoing trade disputes and uncertain global economic conditions, which are likely to cloud the outlook for passenger demand over the longer term.

In addition, the grounding of the 737 MAX 8 fleet had disrupted the group’s operations and rate of expansion.

As fuel price volatility is expected to persist in near term, the group will continue to enter into longer-dated hedges extending to FY2024/25.

Shares in SIA closed 5 cents lower at $9.67 on Wednesday.