The worlds best airline isn’t immune to the volatility of the fuel market, and despite reporting record revenues, profits fell by 47.5%.
This scenario is being reported frequently across many airlines – they’re earning more revenue per seat, but that revenue is only rising around 6% while fuel charges are rising around 21%.
The problem is that most airlines have too much capacity, so they have to fill seats, and while they’re getting good money for the seats, the fuel costs are outweighing the gains. The market is so price sensitive that they just can’t pass on the fuel costs to customers, so it eats into their profits.
Singapore Airlines has also had issues with the Rolls Royce engines on its Dreamliners, leaving many out of service for extensive periods, and subsidiary SilkAir has been hit hard by the 737 Max grounding.
Singapore is also one of those airlines that very much believes in keeping its fleet young, maintenance charges low and new aircraft constantly entering service, so its capital expenditure and borrowing costs have also risen. It’s a perfect storm but Singapore Airlines is well placed to ride it out and keep ahead of the game.