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Singapore Airlines share price: a preview of Q3 earnings

We highlight three key things for investors ahead of Singapore Airlines Group’s Q3 earnings report.

Source: Bloomberg

When is Singapore Airlines’ Q3 results date?

Singapore’s national carrier Singapore Airlines (SIA) Group is announcing its third quarter FY2019/2020 financial results for the three months ended 31 December 2019, next Friday 14 February.

SIA has been ranked as the world's best airline by Skytrax four times and topped Travel & Leisure magazine's best airline rankings for more than 20 years.

The aviation group owns several subsidiaries, including regional flight arm Silkair, low-cost carrier Scoot, and maintenance, repair, and overhaul company SIA Engineering.

Ahead of the Q3 results announcement, we highlight three key things that investors should note.

Passenger load for the quarter rose an average of 2.73%

Between October and December 2019, passenger load factor for the group’s three carriers increased by an average of 2.73% to 85.63%, according to numbers already posted on its website.

Total passengers carried across the last three months of the year was 10.05 million, up 8.64% from 2018’s Q3 total of 9.26 million.

In December 2019, SIA Group airlines' passenger carriage (measured in revenue passenger-kilometres) grew 7.9% compared to last year, outpacing capacity (measured in available seat-kilometres) growth of 4.8%. Passenger load factor (PLF) rose by 2.6 percentage points to 87.6%.

For November 2019, passenger carriage grew 8.3% compared to last year, outpacing capacity growth of 4.4%. PLF rose by 3.1 percentage points to 84.9%. October 2019 saw a PLF increment of 2.5% to 84.4%.

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Net profit for first half of FY19/20 was up 5.1%

The group achieved a net profit of S$206 million in the first half (H1) of the financial year, S$10 million (+5.1%) higher than last year. Revenue rose S$418 million (+5.3%), primarily from strong growth in passenger flown revenue which grew 8.2% to S$514 million.

However, this was partially offset by a reduction of S$138 million in cargo flown revenue, alongside higher expenditure (+$431 million or 5.8%) that reflected enlarged operations.

The performance deterioration in the cargo segment was mainly due to an overall drop in airfreight demand amid US-China trade tensions, and a slowdown in exports from key manufacturing countries in Europe and Asia.

Regional commercial arm SilkAir also continued to struggle, as it turned in another quarter of operating losses, as it remained adversely affected by the global grounding of the Boeing 737 MAX 8 aircraft. For H1 FY19/20, the airline clocked an operating deficit of $19 million for the period.

Joint ventures with other airlines

Partnership agreements with other airlines is another factor that could potentially weigh on the group’s upcoming earnings.

In the last seven months, SIA Group has signed a partnership agreement with Malaysia Airlines, as well as a joint venture agreement with All Nippon Airways (ANA), both of which are aimed at increasing passenger traffic and expanding its network.

The joint venture with ANA aims to expand upon the existing partnership between the two airlines that focuses on codeshare flights and mileage programmes. If approved by regulators, both airline groups would also be able to jointly offer customers more seamless access to flights in their respective route networks, a broad range of joint fare products, tie-ups between frequent flyer programs and aligned corporate programmes to strengthen their proposition to corporate clients.

The commercial agreement with Malaysia Airlines is also expected to strengthen the long-standing partnership between the two airline groups. If approved, both sides would share revenue on flights between Singapore and Malaysia, expand codeshare routes, and participate in joint marketing activities to develop tourism.

Singapore Airlines’s share price is currently down 11% from its 52-week high of S$10.23 per share. It is trading at S$8.70 as of 11.55am on 07 February.

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