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UPDATE 1-Singapore Airlines Q1 profit falls 52 pct, flags weak outlook
July 30, 2014 / 10:36 AM / 3 years ago

UPDATE 1-Singapore Airlines Q1 profit falls 52 pct, flags weak outlook

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SINGAPORE, July 30 (Reuters) - Singapore Airlines Ltd (SIA) reported a 52 percent fall in its first-quarter operating profit, missing analysts' forecasts, as intense competition for passengers and cargo squeezed yields at Asia's second-biggest airline.

"Aggressive fares and capacity injections from competitors will continue to place pressure on yields," the airline said in a statement on Wednesday.

Battling intense competition from Gulf airlines and discount carriers, SIA Chief Executive Goh Choon Phong is pushing Singapore's premium airline into new markets including India, while increasing the group's exposure to the low-cost segment through its fully-owned subsidiary Scoot, and affiliate Tiger Airways Holdings Ltd.

An overcapacity in the global air freight market is also hitting SIA, whose cargo unit still reported an operating loss.

SIA, which has a market value of $10.3 billion, reported an operating profit of S$39.5 million ($31.8 million) in the quarter ended June versus S$81.7 million a year ago.

This compared with an average forecast of S$46.1 million in a Reuters survey of five analysts, though the estimates varied widely. One other analyst estimated an operating loss of S$43 million.

"Looking at the competition and what is coming in terms of capacity, we think that the next 1-2 years will continue to exert pressure on yields. We will have to manage our costs better, including fuel costs, in order to stay competitive," Stephen Lee, SIA's chairman, said on the sidelines of the company's shareholders' meeting on Wednesday.

Five analysts have a "sell" rating on SIA, six rate it as a "buy" and 10 have a "hold" recommendation. (Reporting by Anshuman Daga; Editing by Miral Fahmy)

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