Competition hits SIA hard

It had no choice but to slash prices despite higher fuel prices in a bid to woo passengers.

Things aren't looking any brighter on the cargo front, with the airlines cutting capacity in what it sees as dimming demand. Its only saving grace? Budget performer SilkAir, which has posted strong numbers, proving the continued resilience of short haul flights.

Here's more from PhillipCapital:

SIA reported a 69% decline in net profit for the year as the airline experienced the perfect storm of falling yields and high fuel prices. Operating profits declined across all business segments with SIA cargo recording losses of S$119mn in the year. SIA is recommending final DPS of10.0cents, taking full year payout to 20.0cents, significantly lower than S$1.40 a year ago. Management warned of expected weakness in passenger yields, due to promotional fare offerings and intense competition. FY13E capacity guidance: SIA: +3%, SIA Cargo: +3%, SilkAir: +22%.

The key source of variance from our expectations came from a steeper than expected decline in passenger yield (-3.3% y-y) in the last quarter. Cargo demand remained weak with capacity cut in response to weak demand conditions. Performance from SilkAir is probably the only bright spot for the airline business, reflecting relatively strength on short haul routes.

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