By Aaditya GovindRao and Lisa Barrington
(Reuters) -Singapore Airlines reported a record annual net profit on Thursday, boosted by a one-off gain from the merger of Air India and Vistara, but lower air fares in response to increased competition weighed on operating profit.
The airline group recognised a one-off gain of about S$1.1 billion ($847.20 million) after completing the merger of its 49%-owned Indian carrier Vistara with Air India last November.
Singapore’s flag carrier said net profit was S$2.78 billion for the year ended March 31, compared with S$2.68 billion a year earlier, beating a Visible Alpha consensus of S$2.68 billion.
Its operating profit fell 37% from a year earlier, however, to S$1.71 billion, as passenger yields – a proxy for airfares – dropped by 5.5% due to stiff competition as airlines globally added capacity.
While the airline carried a record annual number of passengers and described demand as robust, increased capacity in the industry drove ticket prices down, while fuel and expenditure rose, squeezing profit margins.
Following warnings from other carriers world-wide, Singapore Airlines said U.S.-led tariffs were likely to hit consumer and business confidence and weigh on passenger and cargo markets.
Annual cargo revenues rose 4.4% on strong e-commerce and perishables demand, and from disruption to Red Sea shipping, but freight yields fell 7.8% due to increased competition.
U.S. carriers such as American Airlines and Delta pulled their forecasts, while Asian major Cathay Pacific said air cargo demand between mainland China and the U.S. was likely to fall.
Singapore Airlines declared a final dividend of 30 Singapore cents per share, lower than 38 Singapore cents declared a year earlier.
($1 = 1.2984 Singapore dollars)
(Reporting by Aaditya Govind Rao and Nichiket Sunil in Bengaluru, Lisa Barrington in Seoul; Editing by Sherry Jacob-Phillips and Barbara Lewis)
