Skip to main content

Advertisement

Advertisement

SIA reviewing fuel surcharge as profit more than doubles

SINGAPORE — Flag carrier Singapore Airlines (SIA) said on Friday (May 13) it is reviewing the fuel surcharge imposed on passengers, a day after it announced a 119 per cent surge in annual net profit to S$804.4 million helped largely by the steep decline in oil prices.

A man walks past a Singapore Airlines signage at Changi Airport in Singapore May 11, 2016. Photo: Reuters

A man walks past a Singapore Airlines signage at Changi Airport in Singapore May 11, 2016. Photo: Reuters

SINGAPORE — Flag carrier Singapore Airlines (SIA) said on Friday (May 13) it is reviewing the fuel surcharge imposed on passengers, a day after it announced a 119 per cent surge in annual net profit to S$804.4 million helped largely by the steep decline in oil prices.

“We review it regularly. That (retaining the fuel surcharge) is the decision at this point in time but we will continue to review it,” SIA Chief Executive Goh Choon Phong said on the sidelines of a meeting with analysts and reporters. Despite the substantial savings from lower fuel costs, several airlines including SIA have not lifted the surcharges as quickly as when they slapped them on almost a decade ago.

Total expenditure of SIA dropped 4 per cent in the financial year ended March 31 to S$14.5 billion, led by a 41.3 per cent decline in the average jet fuel price, although this was offset partially by an increase in the hedging loss and the strengthening of the US dollar against the Singapore dollar. The hedging loss, said SIA, resulted from 53.8 per cent of the group’s fuel requirement being hedged at a weighted average price of US$100 (S$137) a barrel.

Fuel hedges, where airlines have locked in higher prices for fuel, are the primary reason why some carriers, including SIA, are keeping the surcharge, analysts said. Fearing that oil prices may start to rise again, several carriers are also retaining the surcharges as a precautionary step given tickets are sold up to one year in advance, they added.

SIA is also closely monitoring developments at Virgin Australia Holdings after Air New Zealand - the airline’s largest shareholder - disclosed its intention to offload its holding, Mr Goh said. Air New Zealand, SIA and Etihad Airways hold equity stakes in Virgin Australia and Air New Zealand’s decision to exit has triggered speculation that SIA may lap up the stake to pre-empt its Middle Eastern rival from taking a higher share.

“We are watching closely what is going on,” Mr Goh said.

Meanwhile, despite the sharp improvement in profit performance, SIA warned of over-capacity creating pressure on yields and said the outlook remained cautious for the cargo business amid the economic slowdown in China and uncertainty in the rest of the world. Group revenue for the year slipped 2.2 per cent to S$15.2 billion due to lower passenger revenue from the parent airline and lower revenue from its cargo operations.

Read more of the latest in

Advertisement

Advertisement

Stay in the know. Anytime. Anywhere.

Subscribe to get daily news updates, insights and must reads delivered straight to your inbox.

By clicking subscribe, I agree for my personal data to be used to send me TODAY newsletters, promotional offers and for research and analysis.