Singapore Airlines Financial Analysis for FY2024/25 – Net Profit Decline

Date of Report

8 November 2024

Business Description

Singapore Airlines Limited (“the Company”) is a leading airline company based in Singapore. The core operations include passenger and cargo air transportation. The business is segmented into Full-Service Carrier (FSC), Low-Cost Carrier (LCC) under the Scoot brand, and Engineering services. The company also engages in tour activities, payments, lifestyle rewards app, and sale of merchandise. The company operates globally with significant market presence in East Asia, Europe, South West Pacific, Americas, and West Asia and Africa.

Industry Position

Singapore Airlines is one of the prominent players in the airline industry, known for its premium service and extensive route network. The company faces competition from other major airlines such as Emirates, Cathay Pacific, and Qantas. Despite the competitive landscape, Singapore Airlines has maintained a strong market share due to its robust brand reputation and operational efficiency.

Revenue Streams

The revenue streams for Singapore Airlines primarily include passenger flown revenue, cargo flown revenue, and non-scheduled services. Passenger revenues contribute the largest share, followed by cargo and other services. The company’s customer base spans global travelers and businesses, supported by a comprehensive supply chain involving aircraft manufacturers, fuel suppliers, and service providers.

Competitive Advantage

Singapore Airlines’ competitive advantage lies in its premium service, extensive route network, strong brand reputation, and strategic partnerships. The company continually invests in fleet modernization, digital initiatives, and customer service enhancements to retain its leading market position.

Financial Statement Analysis

Income Statement

The Group recorded a net profit of \$742 million for the first half of FY2024/25, a significant decline of \$699 million (-48.5%) from the previous year. This decrease was primarily due to weaker operating performance, lower net interest income, and a loss on disposal of aircraft, spares, and spare engines compared to a gain last year [[2]].

Balance Sheet

Equity attributable to owners decreased by \$2,623 million (-16.1%) to \$13,715 million as at 30 September 2024. Total assets decreased by \$3,310 million (-7.5%) mainly due to a reduction in cash and bank balances, derivative assets, and trade debtors. Total liabilities decreased by \$678 million (-2.5%) primarily due to decreases in trade and other creditors and lease liabilities [[32]].

Cash Flow Statement

Net cash provided by operating activities was \$1,921.7 million. However, net cash used in investing activities was \$644.4 million, and net cash used in financing activities was \$3,220.5 million. The company recorded a net cash outflow of \$1,943.2 million for the period [[9], [10]].

Dividend

The company declared an interim dividend of 10 cents per ordinary share, tax-exempt (one-tier), to be paid on 11 December 2024 [[34]].

Key Findings

Strengths

• Strong brand reputation and premium service
• Extensive global route network
• Robust cash flow from operations

Risks

• Significant decline in net profit (-48.5%)
• Increased competition and pressure on yields
• High exposure to fuel price volatility
• Reduction in cash and bank balances

Special Activities

The company is focusing on digital initiatives, fleet modernization, and strategic partnerships to enhance operational efficiency and customer service [[33]].

Recommendations

If Currently Holding

Investors currently holding the stock should consider holding their position due to the company’s strong brand and operational efficiency, despite the recent decline in net profit.

If Not Currently Holding

Investors not holding the stock may consider a cautious approach. The significant decline in net profit and increased competition pose risks, but the company’s strategic initiatives and dividend payout could present long-term value.

Disclaimer

This analysis is based on the information provided in the financial report for the half year ended 30 September 2024. Investors should conduct their own research and consider their financial situation before making investment decisions.