Singapore Airlines Shares Fall as Fuel Costs, Competition Hit Profit

By Kimberley Kao

Singapore Airlines shares fell into the red for the year after quarterly profit slumped on higher fuel costs and rising regional competition.

Shares of the flag carrier fell as much as 7.0% to 6.13 Singapore dollars (US$4.59) early Thursday before paring losses to 5.0%, with shares 4.1% lower year to date.

Singapore Airlines said late Wednesday that net profit in the quarter ended June slid 38% from a year earlier, with higher revenue offset by an uptick in fuel prices. The airline said passenger yields fell 4.6% despite higher numbers of travelers, and cautioned that yields are likely to stay below last year's levels amid rising regional competition.

It also flagged continued industry pressures from supply-chain constraints, inflation and geopolitical uncertainties.

CGS International analyst Raymond Yap said he expects the decline in passenger yields to continue for the current fiscal year, adding that it's possible the airline doesn't declare significant dividends until May 2025 after its full-year results.

Yap downgraded the stock to reduce from hold, and cut his target price to S$5.88 from S$6.78, citing missed profit estimates and lower yields.

Citi Research analysts highlighted in a note that passenger pricing fell to 12% above pre-Covid levels, lower than the preceding two quarters, which they said may indicate a normalization of ticket pricing as industry capacity ramps up, particularly in the Asia-Pacific region.

Yield pressures are also in line with performance at major airlines including Qantas and Lufthansa due to weakness in Asia, Citi added. The bank kept a neutral rating, adding that "investors could find SIA's bull case a challenge in the near-term as unit passenger pricing declines against unit costs inflation."

Write to Kimberley Kao at kimberley.kao@wsj.com

(END) Dow Jones Newswires

July 31, 2024 23:40 ET (03:40 GMT)

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