SIA's Q1 profit up 56% on non-operating gains

Sale of VA stake yielded $335.新蒲崗迷你倉8m but $317.4m impairment costs reduced gainLIFTED by non-operating gains from the sale of aircraft and exceptional items, Singapore Airlines (SIA) reported a fiscal first-quarter group net profit of $121.8 million, up 56 per cent from $78 million a year ago.The three months ended June 30 saw SIA completing the sale of its 49 per cent stake in Virgin Atlantic to Delta Air Lines for about $455.3 million, resulting in a divestment gain of $335.8 million. But this was substantially offset by $317.4 million in impairment costs, including a $293 million restructuring impairment cost arising from four surplus SIA Cargo freighter aircraft that were removed from the operating fleet and marked for sale. SIA also reaped a $13.9 million surplus from the disposal of aircraft, spares and spare engines.Including non-controlling interests, net profit was $138.4 million, up from $93.9 million.Group revenue edged up 1.7 per cent to $3.84 billion during the quarter, which saw $75 million recognised from settlement relating to changes in aircraft delivery slots.Stripping out the settlement, passenger revenue improved slightly compared to the corresponding quarter last year as passenger carriage grew by 1.8 per cent. However, this was partially offset by weaker yields. Stiff competition and the strong Singapore dollar against key revenue-generating currencies caused yields to fall by 2.6 per cent.Meanwhile, cargo revenue was hit by the double whammy of both lower loads (down 5.3 per cent) and yields (down 5.5 per cent) due to overcapacity in the market and a tepid global economy. Earnings per share were 10.4 cents for the quarter, up from 6.6 cents a year earlier.Operating profit for the group came in at $81.7 million, representing a 13.5 per cent year-on-year increase. Group expenditure inched up 1.4 per cent to $3.76 billion even as lower jet fuel prices offered some relief. The rise was largely because of higher staff and non-fuel variable costs in line with capacity imini storagecrease.Within the group, the parent airline reported an operating profit of $89 million, up from $85 million, while sister airline SilkAir recorded an operating profit of $14 million, down from $18 million previously. SIA Engineering turned in an operating profit of $28 million, down from $34 million, and SIA Cargo narrowed its loss to $40 million, from $49 million previously.During the quarter, the parent airline's passenger carriage rose 1.6 per cent but this was outstripped by capacity expansion (3.5 per cent) causing load factor to fall 1.5 percentage points to 78 per cent.Meanwhile, SIA Cargo's load factor of 62.5 per cent was slightly lower as freight carriage dropped 5.3 per cent even as cargo capacity was scaled back by 4.8 per cent.Commenting on the group's outlook, SIA said: "Forward passenger bookings for the next few months are expected to be higher against the same period last year and in line with the planned increase in passenger capacity."The airline, which faces stiff competition from budget carriers and rapidly expanding airlines in the Middle East, also expects weaker yields. "On the cargo front, demand is expected to remain depressed, in turn placing pressure on loads and yields," SIA said, adding that it will continue to adjust capacity and flight schedules in response to demand.Cash and cash equivalents stood at $5.6 billion at the end of the quarter, compared with $5 billion as at end June 2012.In a report circulated before SIA released its results after markets closed, Credit Suisse analysts said: "The parent business should generate better revenues on a brighter yield outlook as premium travel shows some improvement, offsetting a continued decline in freight and (we expect) weaker contributions from regional operations (SilkAir), where capacity growth has outpaced demand growth".They also suggested that a special dividend, thanks to the sale of VA, could be announced after 2Q FY14 numbers are released.Shares in SIA closed at $10.25 yesterday, down six cents.self storage