Singapore Airlines outlook warning casts a shadow over air show

By Thomson Reuters Feb 21, 2024 | 12:24 AM

By Lisa Barrington, Brenda Goh and Joe Brock

SINGAPORE (Reuters) – A warning from home carrier Singapore Airlines that ticket prices were coming under pressure as costs are also rising sent its shares down nearly 10% on Wednesday, casting a shadow over the Singapore Airshow.

The Asian airline’s biggest one-day share price plunge since the global travel industry ground to a halt in March 2020 because of COVID-19 came after its December quarter earnings missed market expectations on Tuesday.

It underscored broader aviation industry concerns about supply chain constraints and a more cautious outlook in Asia as China’s international travel recovers from the pandemic at a slower pace than in much of the rest of the world.

As Airbus, Boeing, and COMAC of China looked to seal aircraft purchase deals at Asia’s biggest aviation gathering, Singapore Airlines said on Tuesday that high fuel prices, inflationary pressures and supply chain constraints were presenting challenges to airlines globally.

“Passenger yields continue to come under pressure from increased competition as capacity restoration continues across the industry,” the airline added.

The carrier’s net profit, while still strong, has fallen for two consecutive quarters after reaching a record in the June quarter last year, when it was buoyed by strong post-pandemic summer travel demand.

Its warning followed Air New Zealand’s on Monday flagging weaker-than-expected results in the six months through June because of challenges from engine maintenance requirements, economic and inflation risks, early signs of softness in domestic demand and intense competition on U.S. routes.

U.S.-China flight capacity remains more than 75% below pre-pandemic levels this month, according to aviation data provider OAG, with services being restored slowly amid tensions between the governments. In the meantime, U.S. carriers have sent more long-haul aircraft to Australia and New Zealand, pressuring fares in those markets.

Other challenges for airlines include the need to ground some planes for engine inspections to check for potentially flawed components.

Philippine low-cost carrier Cebu Pacific has 10 Airbus A320neo family planes out of service as workers check RTX subsidiary Pratt & Whitney’s GTF engines, its chief executive Michael Szucs said on the sidelines of the air show.

Air New Zealand, which also uses the engines, said the inspections would cost it NZ$35 million ($21.64 million) in the current half, including the cost of short-term leased aircraft and adding contact centre resources for affected customers.

($1 = 1.6171 New Zealand dollars)

(Reporting by Lisa Barrington, Brenda Goh and Joe Brock; Writing by Jamie Freed. Editing by Gerry Doyle)