UPDATE 2-Singapore Air Q1 net profit beats f'cast

* Q1 net profit S$253 mln, above S$232 mln f’cast

* Highest quarterly profit since 2009 Oct-Dec quarter

* Sees passenger traffic, yields holding up in 2010

* Shares down 0.14 percent ahead of earnings

(Adds details, analyst quotes)

By Harry Suhartono

SINGAPORE, July 26 (Reuters) - Singapore Airlines SIAL.SI, the world's second-largest airline by market value, said on Monday a recovery in passenger and freight traffic should be sustained in the near term after posting better-than-expected first quarter profit.

Global airlines are recovering from the worst downturn in aviation history, but some analysts doubt if the rebound can be sustained with the euro zone debt crisis threatening demand for long-haul flights.

Singapore Airlines said: “Advance bookings indicate that the year-on-year recovery in passenger carriage and yields evident in the quarter to June will hold up for the rest of 2010.

“Similarly, leading indicators...suggest that recent resurgence in air freight may be sustained in the near-term, although the rate of growth may abate.

The International Air Transport Association said this month global airlines will turn a $2.5 billion profit this year, a stunning swing from the substantial loss of $2.8 billion the industry group forecast three months ago. [ID:nLDE65604X]

The recovery was tainted when a volcanic eruption in Iceland caused havoc in air travel earlier this year.

Singapore Airlines, whose competitors include Australia's Qantas QAN.AX and Hong Kong-listed Cathay Pacific 0293.HK, racked up costs of S$50 million as a result of the disruption.

“Notwithstanding the short-term negative effect from the Iceland volcano, I think everything appears to be coming on strongly for Singapore Airlines,” said Sukhor Yusof, an analyst at Standard & Poors.

“An increase of 15 percent in (passenger) yield is considered strong given that they did not add capacity or increase the number of aircraft other than what they have on the delivery schedule,” he said.

Singapore Air’s passenger yield improved to 11.7 Singapore cents per passenger kilometer from 10.2 Singapore cents a year ago.

Sukhor said fuel costs and the stability of demand for European traffic, a key profit area for Singapore Airlines, would be the main issue that investors would need to monitor for the rest of this year.

Singapore’s flag carrier posted an April-June net profit of S$253 million ($184.7 million), beating analysts’ forecasts of S$232 million and compared with a S$307 million loss a year ago when the airline recorded its first quarterly loss in six years.

It was Singapore Airlines’ highest quarterly profit since October-December 2009, when the firm posted a net profit of S$404 million.


For Starmine comparative data:


Shares in Singapore Airlines, which is 54.5 percent owned by state investor Temasek Holdings [TEM.UL], have fallen about 1 percent this year, underperforming the broader Singapore market .FTSTI which rose 2.3 percent as well as major rivals.

The counter closed 0.14 percent down at S$14.76 on Monday, ahead of the earnings announcement.

Analysts say Singapore Airlines’ reliance on premium travellers and its conservative growth strategy compared to its rivals have made its share price lag other major Asian carriers.

Cathay Pacific, one of Singapore Airlines’ main rivals in Asia, expects to see strong first half 2010 results on improved premium passenger and cargo revenues despite higher fuel prices. [ID:nTOE649098]

Air China 601111.SS0753.HK, the largest airline by market value, had said it plans to add nearly 100 planes to its fleet by 2012 and boost its capacity as demand rebounds in China. [ID:nTOE63P04L]

Cathay Pacific shares have risen about 12.4 percent this year, while Air China shares listed in Shanghai have soared some 28 percent. (Reporting by Harry Suhartono; Editing by Dhara Ranasinghe)