Singapore Airlines Ltd., first in the world to put a double bed, mattress and duvet on a commercial plane, posted a surprise loss at its marquee brand for the first time in three years. The stock plunged the most in almost six years.
Intense competition from Emirates, Qatar Airways and Etihad that offer services such as a personal butler and shower on board aircraft has crushed profits at Singapore Air and its Hong Kong-based rival Cathay Pacific Airways Ltd. as the two Asian airlines conduct a strategic review of their business. To fight back, Singapore Air Chief Executive Officer Goh Choon Phong is boosting borrowings to fund a record $53 billion order for new planes.
“Evidently, the pressure of the Middle Eastern carriers and the lack of a domestic market is impacting, similar to Cathay,” Joshua Crabb, head of Asian equities at a unit of Old Mutual Plc, said from Hong Kong. Crabb said he doesn’t own Singapore Air stock.
Singapore Air group — which includes brand Singapore Air, a regional airline and two budget carriers — announced a surprise net loss of S$138.3 million ($99.3 million) in the three months ended March, compared with a median forecast for a profit for S$54.3 million in a Bloomberg survey of six analysts. The company, which took a previously-announced provision of S$132 million in the quarter relating to its cargo unit, said Friday it was re-integrating the business into the main airline.
Brand Singapore Air had an operating loss of S$41 million in the quarter while Budget Aviation Holdings – which operates the two low-fare carriers Scoot and Tiger — had a profit of S$22 million at the operating level, according to a statement the carrier issued to the Singapore stock exchange Thursday after the market closed for trading. The loss at the main airline is the first since the fourth quarter of fiscal year 2014, according to company filings.
Shares of Singapore Air fell as much as 6.7 percent on Friday, the biggest intraday drop since August 2011, in the city-state to S$10.04.
CEO Goh said Friday that bold and potentially radical actions are needed to tackle costs. The company said it has set up a “dedicated transformation office” to conduct a wide-ranging review, encompassing network and fleet, product and service, and organisational structure and processes “to better position the group for long-term sustainable growth across its portfolio of full-service and budget airline operations.”
“We will leave no stone unturned,” Goh said at a post-results briefing, where he fielded questions predominantly on the review. “Some changes may be radical, but if needed, we will do…