SINGAPORE Airlines (SIA) has soared back to profitability in its latest quarterly results, in a stunning turnaround from losses in the previous six months.
The return to the black means SIA employees will get a partial restoration of the 10 per cent pay cut they suffered because of the airline's losses from April to September last year.
SIA's net profit for the three months ended Dec 31 came in at a sterling $404 million, which was its best quarterly profit in almost two years.
The gains marked a remarkable turnaround from the airline's losses of $307 million in the first quarter and $159 million in the second quarter. SIA's financial year ends March 31.
The rapid return to black ink will please shareholders, but staff will probably be even more chuffed.
A collective agreement between SIA and its unions meant that the losses in the first and second quarter saw a complete cut of the monthly variable component (MVC) of the staff salaries, which comprises about 10 per cent of an SIA employee's total pay.
After the return to profitability, the airline will restore about 25 per cent of the MVC with immediate effect.
Captain P. James, president of the Air Line Pilots Association-Singapore, praised the 'joint effort' from SIA's management and staff for steering the firm back to profitability.
'I'm very happy that the company has done well, it was an effort from everybody who pulled together during the crisis,' he said.
'The efforts from the staff are paying off. For us to achieve $404 million profits in a market that hasn't totally recovered, it's a very good achievement.'
The encouraging set of third quarter results reflected in both SIA's topline and bottom line.
Group revenue came in at $3.42 billion, up 10.9 per cent from the previous quarter. The increase came as cargo volumes rebounded and demand for travel improved, amid a gradual recovery in the global airline industry which suffered a bleak year last year.
However, revenue was down 17.9 per cent compared to the $4.16 billion chalked up in the previous corresponding quarter.
SIA carried a total of 4.41 million passengers in the three-month period, which translates to a passenger load factor of 82.4 per cent. The load factor refers to the number of available seats taken up.
This was a marked improvement from the 4.19 million passengers and 79.6 per cent load factor of the preceding quarter.
The cargo load factor, measuring the extent to which cargo space is filled, came in at 65.1 per cent, which was also up somewhat from the 62.9 per cent in the second quarter.
On the costs front, expenditure for SIA was down $169 million or 5.2 per cent from the second quarter.
The increase in jet fuel prices led to a $34 million rise in fuel costs before hedging, but hedging losses were lower by $146 million. Savings in other areas, such as payroll costs, helped trim another $57 million.
Compared to the third quarter last year, net profits were up $67 million or about 20 per cent.
The stellar quarter also meant that SIA managed to narrow dramatically its $466 million first half loss. For the nine months to December, the net loss was down to $62 million.
The company is expecting the recovery to continue into the current quarter.
'Passenger loadings in January and bookings in hand indicate that the recovery in the third quarter is likely to continue in the final quarter of the current financial year,' it said in a statement.
However, SIA added a slightly cautious note amid the exuberance. 'The business outlook for the group in 2010 is encouraging but it must be acknowledged that uncertainties linger over the global economy.'
Earnings per share were 34.1 cents, up from 28.4 cents in the same quarter last year.
Before the results announcement, SIA shares closed at $13.66, down 20 cents from the previous day.
jonkwok@sph.com.sg