SINGAPORE (Feb 14): Singapore Airlines has reported better earnings for its 3QFY2019 but warns of difficult period ahead because of the Covid-19 outbreak that has crimped travel.

For the three months to Dec 2019, SIA’s revenue increased by just 3% y-o-y to $4.47 billion but its bottomline grew by 10.9% y-o-y to $315 million thanks to better efficiencies.

However, with the virus outbreak showing no signs of abating, the airline is warning of “significant challenges”. 

Both the flagship brand, SIA, and SilkAir, the subsidiary, have “drastically reduced” frequencies to China this month and next. Scoot, the budget brand, has suspended all flights to China till March 28. 

“Amidst this challenging environment, the SIA Group will continue to be proactive and nimble in making appropriate network adjustments and managing costs tightly,” says SIA in its earnings announcement.

While passenger revenue grew by 7% during the quarter, weaker cargo traffic, no thanks to the US-China trade war, resulted in revenue that’s 9.3%.

The company warns that fuel prices will remain volatile, given the recent geopolitical tensions and demand-side uncertainties in the global oil market.

SIA has hedged 79% of its fuel needs for this current 4Q at US$76.

As at Dec 2019, SIA as a group operates passenger service to 137 destinations and also runs 19 cargo routes.

Year to date, SIA shares have dropped 5.4% to close at $8.62 on Feb 14. At this level, it is trading at just below 15 times historical earnings. 

As at Dec 31 2019, the company’s book value was $10.25 per share, down from $11.22 as at March 31 2019.