Singapore Airlines

[millionairemind]

Things are getting worse...

Jan 25, 2009
SIA cuts 4 single-class flights
By Karamjit Kaur, Aviation Correspondent

SINGAPORE Airlines' non-stop, business-class- only flights to the United States have become the latest casualties of a global downturn in travel.

A drop-off in passengers has prompted the carrier to axe four of the 14 such services it offers to Los Angeles and New York weekly.

From Feb 17 to March 25, there will be no flights on Tuesdays and Wednesdays. What happens after will be subject to review, the airline told The Straits Times.

According to some travellers, the 100-seat Airbus 340-500s used on the routes were flying with over 70 per cent of their seats empty on some days.

Details of the Singapore-US flight cuts come more than a week after it was revealed that SIA is cutting 214 other flights, mainly regional services, until the end of March. This follows a marked downturn in global travel sparked by the financial crisis.

According to the latest data compiled by the International Air Transport Association (Iata), demand for first- and business-class seats fell 12 per cent last November, compared with the same month in 2007. Overall demand fell 5 per cent during the same time.

[millionairemind]

January 28, 2009, 6.28 pm (Singapore time)

Update: SIA suspends some flights amid downturn

SINGAPORE - Singapore Airlines (SIA) said on Wednesday it will suspend some international flights as the worsening global economy takes its toll on travel demand.

Flights to India, Southeast Asia, the United States and Europe will be affected, SIA said in a statement.

'Singapore Airlines is making further adjustments to its route network to better match capacity with demand,' it said.

'Where demand falls, capacity adjustments will be made and this process will continue going forward.'

It said the changes will be implemented progressively and will apply until the end of March.

Flights between Singapore and the Indian city of Hyderabad will be cut to three times weekly from four, the airline said.

Service between Singapore and New Delhi will be trimmed to five times a week from six, while Mumbai-Singapore service will be cut to four times a week from five.

In Southeast Asia, two flights between Singapore and Bangkok will be suspended from February 2, although the airline said it will continue to operate 25 flights a week to and from the Thai capital.

In Europe, two flights operating between Singapore and London will be suspended on Mondays and Thursdays from March 9-23. The frequency on the Singapore-London route will be cut to 19 flights a week from 21.

Services between Singapore and Zurich will be reduced from daily to five times a week, SIA said.

At the same time, it said it would add some services to the Middle East.

Earlier on Wednesday, SIA said it was reducing its all-business class service to New York and Los Angeles in the face of the global economic downturn.

The 14 weekly Airbus A345 flights will be cut to 10, it said, adding the change will initially take effect between February 17 and March 25.

'This is part of our capacity adjustments to ensure capacity better matches demand during the economic downturn,' SIA's vice-president of public affairs, Stephen Forshaw, said in a statement.

'We don't want to be flying half-empty planes around the world any longer than we have to, because it increases our cost burden at a time when we can least afford that.'

The non-stop all-business service to New York began in May last year, followed by Los Angeles in August.

SIA said its December passenger numbers were down 7.5 per cent year-on-year.

Airlines based in the Asia Pacific region carried 141.5 million international passengers in 2008, or 1.8 per cent fewer than record levels in 2007, an industry group said last week. -- AFP

[millionairemind]

Published February 7, 2009

UOB-Kay Hian sees SIA reporting $2.1b hedging loss

By VEN SREENIVASAN

SINGAPORE Airlines (SIA) will report a huge $2.1 billion hedging loss equivalent to a loss per share of $1.70, says a local analyst.

UOB-Kay Hian analyst K Ajith expects SIA's operating profit to decline to $118m in Q3 2009.

K Ajith of UOB-Kay Hian calculates that with jet fuel having slumped from US$119 a barrel in October 2008 to US$54 by year-end, SIA will suffer a hedging loss that will depress its book value from $12.25 a share to $10.55.

The estimate is based on SIA's mark-to-market accounting of its outlay on fuel, which UOB-Kay Hian estimates to be hedged at an average of about US$110 a barrel.

'At present, SIA is trading at 0.9 times P/B. And if it remains at 0.9 times with book value dropped, it should trade at a reduced target price of $9.70,' says UOB-Kay Hian.

SIA, which will report its third-quarter earnings on Feb 10, slid 32 cents to close at $10.74 yesterday.

The impact of the hedging loss is not new - SIA chief executive Chew Choon Seng said at the Q2 results briefing three months ago that fuel was hedged around $115 a barrel. But this is the first time an analyst has worked out the potential loss, albeit that this is a paper loss at present.

Some analysts, such as Vincent Ng of S&P Equity Research, warn against reading too much into paper losses on fuel hedging. 'Hedge accounting generally goes straight to the reserves in the balance sheet, rather than the profit-and-loss account,' he explained. 'Meanwhile, SIA also pays spot prices for half of its fuel needs.'

Also, SIA's hedge contracts go forward some 18 months from the contract date, by which time the actual fuel price could climb back closer to the hedged price.

Nevertheless, few have reason to be upbeat on SIA's immediate prospects - or those of the aviation sector as a whole.

The industry is in a tailspin thanks to the global economic slowdown and the financial meltdown. Passenger and cargo traffic have dived, and combined with excess capacity, this has put pressure on yields.

Analysts expect SIA to have suffered a 10-15 per cent drop in passenger yield in the October-December 2008 quarter due to falling premium seat sales and falls in the key Australian and British currencies against the Sing dollar. Meanwhile, air cargo operations have been racking up losses since the first half of the current financial year, prompting SIA to start grounding planes and to ask pilots to take no-pay leave.

SIA has cut capacity about 3 per cent system-wide over the past two months, including scrapping of several of its relatively recent all-business class non-stop services to New York and Los Angeles.

One of the more upbeat forecasts for SIA is from CIMB's Raymond Yap, who sees a Q3 net profit of $385.6 million, down 35 per cent year-on-year. But Mr Yap expects SIA to post a net profit of only $55.8 million for the January-March quarter, which is traditionally slow.

'If we are correct, SIA could achieve a full-year net profit of $1.253.8 billion, about 10 per cent higher than our official forecast of $1.137 billion, but down almost 40 per cent from a year ago,' he said in a paper yesterday.

UOB-Kay Hian's Mr Ajith expects operating profit to decline to $118 million in Q3 2009. He is forecasting an FY 2009 net profit of $915.3 million, below the consensus estimate of $1.1 billion.

Citigroup Global Markets is also downbeat on SIA and has a medium-term price target of $9. Besides the tough operating environment, contributions from subsidiaries and associates will be under pressure, Citigroup said.

'SIA would be earning an ROE well below its cost of capital, which suggests that its share price could trade below book value during this stage of the economic downturn,' Citi analyst Robert Kong noted this week. 'With earnings and price performance volatile, it is difficult to have a long-run fair value for an airline stock.'

Citi forecasts SIA's FY 2010 return on equity will fall to 6.7 per cent, from 9.6 per cent in FY 2009.

Going forward, the issue for SIA is how it manages capacity and costs amid deteriorating demand, analysts say.

[millionairemind]

Singapore Airlines (SIA)
Sell
Citi Investment Research
Feb 6 close: $10.74

SINGAPORE Airport Terminal Services (SATS), 81 per cent owned by SIA, reported Q3 FY2009 core profit of $39 million, down 4 per cent q-o-q and 24 per cent lower than the corresponding period last year. Deteriorating business conditions were reflected in operating performance.

For Q3 FY2009, all operating metrics, with the exception of flights handled saw weaker performance year-on- year; In particular, cargo handled slumped 13.4 per cent y-o-y, while passengers handled dropped 2.2 per cent y-o-y. On the other hand, rising expenses (up one per cent y-o-y) on higher raw material costs and utilities charges resulted in operating profit falling 8 per cent y-o-y for the quarter.

Associates continue to struggle: Q3 FY2009 profit before tax contribution from AJVs fell 57 per cent y-o-y and 18 per cent q-o-q to $6 million as overseas markets suffered from deteriorating market conditions and excess capacity from prior build-ups.

SFI acquisition expected to be completed by March 2009: Having obtained minority approval to proceed with acquisition of SFI, SATS will now proceed with the mandatory offer for all shares held by SFI's minorities. Management expects the transaction to be completed by the end of March 2009.

No sign of recovery: Management expects further flight cuts as well as lower cargo throughput and passenger traffic in coming months as airlines respond to weaker economic demands. On the other hand, SATS could stand to benefit from the withdrawal of Swissport from Changi by end March; SATS is still in discussions with the affected airlines, which include Tiger Airways.

[millionairemind]

February 10, 2009, 6.00 pm (Singapore time)

Update: SIA Q3 net falls 43%, may cut flights

* Q3 net down 43% on hedging losses, cargo demand weakens
* sees weak demand for air transport in 2009
* says to adjust flight schedules, capacity

SINGAPORE - Singapore Airlines, the world's largest airline by market value, posted a 43 per cent drop in quarterly profit, hurt by hedging losses and slowing demand for travel and cargo amid a global economic downturn.

Singapore Air, which ranks ahead of Japan's All Nippon Airways, also warned that demand for air transport will remain weak this year as global trade slows. The city-state's flag carrier may continue to scale back flights and reduce capacity to cope with the downturn.

Singapore Air, 55 per cent-owned by state investor Temasek Holdings, has seen declining passenger demand as the global slowdown crimps corporate and leisure travel, forcing it to cut flights to other Asian cities.

Global passenger traffic will fall 3 per cent this year, the first drop since 2001, and airline losses will total US$2.5 billion, putting hundreds of thousands of industry jobs at risk, the International Air Transport Association (Iata) said in December.

Singapore Air's October-December net profit fell to S$337.2 million (US$225 million) from S$590 million, beating a forecast for S$312 million by four analysts.

The airline saw some relief on the cost side as jet fuel prices fell sharply. Jet fuel traded in Singapore more than halved in October-December from a year ago amid a sharp drop in crude oil prices.

However, Singapore Air suffered S$341 million in hedging losses, as the airline had purchased in advance part of the fuel requirements when fuel costs were higher.

The hedging losses may continue in the current quarter as the carrier hedged 44 per cent of its jet fuel requirements at an average cost of US$131 per barrel.

Quarterly revenue for the airline, which derives about half its sales from first-class and business travellers, was S$4.16 billion compared with S$4.27 billion a year ago.

Analysts said Singapore Air may have suffered less damage than rivals in the current economic downturn, but warned margins could fall sharply as businesses cut costs.

'We think passenger yield could fall sharply from here, negatively affecting the carrier's future profitability,' Morgan Stanley said in a client note ahead of the earnings.

Australia's Qantas Airways Ltd last week said its first-half profit fell by two-thirds as high fuel costs and a downturn in international travel pinched, and it raised A$500 million (US$323 million) by selling new shares.

SIA shares fell more than a fifth in October-December, while the benchmark Straits Times index lost 25 per cent. Shares in rival Cathay Pacific fell 33 per cent and Qantas lost 16 percent. -- REUTERS

[ucypmas]

So, is SIA cooking the books?

SIA confounds its critics once again

Profits fall, but airline dodges losses that were projected from fuel hedging

By VEN SREENIVASAN

(SINGAPORE) When it comes to Singapore Airlines, analysts can often find themselves embarrassingly off the mark.

Top draw: The biggest challenge for the airline now is demand deterioration

SIA once again confounded critics who had made dire predictions of massive fuel hedging losses by unveiling, instead, a $192 million fuel hedging gain for the first nine months of its financial year 2008-09.

This was despite the price of jet fuel correcting from its July 2008 peak of US$171 per barrel to US$99 per barrel in the fiscal third quarter.

'While lower fuel prices reduced expenditure on fuel by $125 million, losses in hedging amounted to $341 million,' SIA said in statement accompanying its third quarter results yesterday. 'Other cost items were well contained.'

This means a hedging gain of $533 million in the first six months, which more than offset the losses suffered in the third quarter.

Just last week, several investment houses had predicted that the airline would record huge hedging losses. UOB KayHian put the figure at just over $2 billion for the year, based on hedged price averaging US$110 pbl.

Given the latest numbers unveiled by SIA, it would have to suffer a fourth quarter hedging loss of some $2.2 billion for the analysts to be proven right.

SIA said that for January to March 2009 quarter, it had hedged 44 per cent of its fuel requirements, or approximately 3.7 million barrels, at average jet fuel price of US$131 pbl. Given that prevailing fuel price is around US$60 pbl, this assumes a hedging loss of some US$200 million (or some S$350 million) - still a long way from $2.2 billion.

SIA uses collars, options and swaps which enable it to mitigate its hedging losses and free itself from unfavourable hedged positions. In addition, it also benefits on the lower spot fuel prices.

The airline yesterday unveiled third-quarter numbers which also beat most analysts' forecasts.

Net profit for the October-December 2008 period fell by 43 per cent to $337.2 million, from $590 million. This came on the back of a 2.8 per cent drop in topline revenue to $4.16 billion, from $4.28 billion a year earlier.

One of the main drags on profit was the loss-making cargo unit.

SIA Cargo posted a loss of $46 million during the quarter, a stark contrast to the $73 million profit it made a year earlier. Regional airline unit SilkAir posted operating profit of $12 million, some 17.2 per cent down from the same quarter a year earlier.

Operating profit for the parent airline company came to $314 million, down $199 million or 38.7 per cent from a year earlier. This would have been some $144 million higher if not for adverse forex movements - especially the depreciating Australian dollar, British pound and the euro.

The results translated into a Q3 earnings per share of 28.4 cents, compared to 49.8 cents a year earlier.

For the nine months to end-December, SIA posted net profit of $1.02 billion, compared to $1.52 billion a year earlier.

The company was sitting on cash of some $4.67 billion at end-December.

However, the airline revealed that total equity attributable to shareholders decreased by $1.67 billion, from $15.13 billion as at March 31, 2008 to $13.45 billion at end-December, due to a decrease in fair value reserve of $1.5 billion.

'The decrease in fair value reserve was mainly due to a fair value loss on outstanding fuel hedging contracts following a decline in fuel prices, partially offset by a fair value gain on outstanding foreign exchange currency hedging contracts,' it said in the statement.

SIA's jet fuel bill rose to $1.66 billion in the October-December period, from $1.33 billion a year earlier. And as the average jet fuel price for April to December 2008 increased 44.8 per cent from US$94 pbl to US$137 pbl, the airline's fuel bill rose $1.46 billion to $5.11 billion.

The biggest challenge for the airline now is demand deterioration.

A total of 4.8 million passengers flew SIA in the third quarter, a 4.2 per cent drop from last year. Passenger carriage (in revenue passenger kilometres) was 1.2 per cent down, while capacity (in available seat-kilometres) grew 2.3 per cent.

As a result, passenger load factor declined 2.8 percentage points to 78.5 per cent. The breakeven passenger load factor increased five percentage points to 72.7 per cent, as yield grew a third slower than the rise in unit cost.

SIA Cargo carried 14.2 per cent less freight (in load tonne-kilometres) than the corresponding period a year earlier.

With capacity decreasing at a slower rate (-7.5 per cent in capacity tonne-kilometres), cargo load factor fell 4.5 percentage points to 58.4 per cent. This was below the cargo breakeven load factor of 63.4 per cent, which had risen 5.5 percentage points due to rising costs and falling yield.

Looking ahead, the airline expects demand for air transportation to remain weak.

[millionairemind]

Published February 12, 2009

Brokers' Take

Singapore Airlines
Feb 11 close: $10.88
KIM ENG RESEARCH, Feb 11

NOT bad, under the circumstances: Singapore Airlines (SIA) produced a solid set of results, despite the current environment.

Third quarter 2009 earnings declined by 43 per cent to $337.2 million, but was ahead of our consensus expectation of around $300 million. Our variance came from higher than expected aircraft/spare parts sale. Operationally, our numbers were in line.

Loads have held up: Despite concerns of falling passenger traffic, SIA's passenger load factor of 78.5 have held up extremely well, versus 81.3 in Q3 2008 and 79.1 in Q2 2009. Furthermore, breakeven load factor came off to 72.7, from 74.2 in Q2 2009, mitigated by lower fuel prices and costs management.

Excluding fuel, operating costs were lower by 5.5 per cent versus Q2 2008.

Yields were surprisingly good: Surprising on the upside was passenger yields, which improved to 12.8 cents per passenger km, versus 12.4 cents in the previous quarter. This would indicate that demand for the premium classes remain resilient.

Going forward, however, we do still expect some yield erosion as SIA has cut its fuel surcharges, and we expect weaker passenger loads. Cargo continues to be extremely weak.

Wrong hedge on fuel, but still a beneficiary: SIA's fuel cost declined by 13 per cent sequentially to $1.6 billion, but was up 25 per cent vs Q3 2008, in line with fuel price trends. SIA's full benefit from lower prices was mitigated by hedging.

Maintain Buy: We are maintaining our full year forecast of $1.41 billion for FY2009, (versus consensus of $1.1 billion) having assumed weaker load factors and yields, with SIA having already earned $1 billion year-to-date.

Our target price is maintained at $14.40, based on 1.1 times forward book value. Currently, SIA is trading at a 0.9 times historical book value of $11.35.
BUY

[millionairemind]

Brokers' Take

Singapore Airlines
Feb 12 close: $10.44
CITI INVESTMENT RESEARCH, Feb 12

SELL: revenue pressures set to rise in FY2010 expected (FY10E), target $8.50.

That SIA's Q3 FY2009 results beat consensus is scant consolation for a rapidly deteriorating operating outlook into FY10E. Hedging losses and book value erosion appear set to continue, but it is revenue worries on deteriorating traffic and yield data that will pressure earnings.

Given unprecedented market conditions, management indicated that SIA has no explicit dividend policy, and we view that a $1.00 DPS may be at risk in spite of SIA's solid cash position.

FY09E-FY11E earnings per share estimates cut 6-9 per cent: We expect further passenger traffic volumes and yield contraction, and further cargo operating losses (9M FY2009: loss $122 million). We assume jet fuel prices of US$75-80/bbl for FY10E/11E.

SATS' consolidation of SFI should provide about $25 million uplift to earnings.

Jet fuel and hedging losses: Q3 fuel costs fell 14 per cent q-o-q. Average spot jet fuel prices for December quarter. US$99/bbl (Sept: US$160/bbl) fell sharply, offset by a Q3 hedging loss of $341 million (Q2 gain: $186 million).

SIA booked unrealised hedging losses to equity of $719 million, plus $406 million associate fair value losses, reducing December book value/share to $11.35.

Management noted that for January-March 2009, 44 per cent of fuel needs (3.7 million bbls) were hedged at an average price of US$131/bbl. We forecast another $389 million of hedging losses for Q4 FY09E, with more to come in FY10E.
SELL

[iam802]

Saw this on AsiaOne


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SIA suspends flight to Vancouver

http://travel.asiaone.com/Travel/News/S ... 21941.html

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[millionairemind]

February 16, 2009, 5.42 pm (Singapore time)

SIA Jan load factor slips

SINGAPORE - Singapore Airlines (SIA), the world's biggest airline by market value, filled 63 per cent of the space available on its planes for passengers and cargo in January, down from 68 per cent a year ago, it said on Monday.

SIA said overall passenger load for January stood at 74.1 per cent. -- REUTERS

SIA to cut capacity by 11%

SINGAPORE - Singapore Airlines said on Monday it plans to reduce capacity by 11 per cent in the 12 months starting April, and it has begun talks with trade unions on steps to cope with the downturn. -- REUTERS