Singapore Airlines on Wednesday (Jul 31) warned that a key revenue metric would remain under pressure this year as rising competition crimps average fares and higher fuel costs dent profits.
Airlines globally have been increasing the number of flights and routes to cater to robust air travel demand, especially during the summer months. This has resulted in heightened competition, squeezing airlines’ margins as ticket prices take a hit and fuel costs rise.
“The global airline industry continues to face challenges from increased competition, supply chain constraints, inflationary pressures on operating costs including from airports and service providers, and geopolitical uncertainties,” the airline said.
“Passenger yields are expected to stay below the previous year’s levels as more capacity enters the market, particularly in the Asia-Pacific region,” it added.
The yield, a measure of average fare paid per mile, fell in the June quarter to 10.3 Singaporean cents per kilometre from 10.8 Singaporean cents a year earlier.
This is the company’s first result announcement after a London-Singapore flight ran into severe turbulence on May 20, causing dozens of injuries and a death.
In the quarter ended Jun 30, the company’s expenditure jumped 14 per cent from a year earlier to S$4.25 billion (US$3.17 billion), as fuel expenses surged 30 per cent.
This hurt the flag carrier’s income, which fell to S$452 million from S$734 million a year earlier, and missed the Visible Alpha consensus of S$504.6 million.
Passenger load factor – a measure of how many seats are filled on planes – for the group as a whole was 86.9 per cent, compared with 88.9 per cent a year earlier.