Singapore Air Q2 profit halves, yields under pressure

SINGAPORE (Reuters): Singapore Airlines Ltd. (SIA), the world’s second largest carrier by market value, posted on Thursday a 49 percent drop in second quarter net profit due to high jet fuel prices and said yields will remain under pressure.

The global airlines industry, which only recovered from its worst-ever downturn last year, is facing new headwinds such as rising jet fuel prices and economic uncertainties in Europe and United States.

“The prevailing economic uncertainty and weak consumer confidence are impacting demand for air transportation. Advance passenger bookings are showing signs of weakness, particularly in Europe and the United States,” SIA said in a statement.

“Global purchasing manager indices (PMIs) have also fallen, pointing to weaker demand for air freight. Both passenger and cargo yields are therefore expected to remain under pressure.”

Analysts have said SIA’s market position has also been undermined by the rise of Middle Eastern rivals such as Emirates for long-haul routes, and aggressive expansion of budget carriers like AirAsia Bhd and Qantas Airways Ltd’s JetStar on shorter flights.

The airline, about 55 percent owned by Singapore state investor Temasek Holdings , earned S$194 million ($152.7 million) for the three month ended September compared to S$380 million a year ago.

Its quarterly earnings was inline with the average forecast of S$194.8 million by four analysts polled by Reuters.

The International Air Transport Association (IATA) recently raised its 2011 profit forecast for the airline industry to $6.9 billion from $4.0 billion, but the grouping expects the industry’s profit to fall by 29 percent next year.

IATA said in a statement on Thursday that the pace of passenger yield improvements in the third quarter has slowed but was still moving upwards.

SIA said fuel costs rose 35 percent in the first half from a year ago to S$747 million and cut its interim dividend to 10 Singapore cents from 20 cents previously.