SINGAPORE, Feb 7 — Flag carrier Singapore Airlines (SIA) said yesterday its third-quarter net profit quadrupled, helped largely by a consolidation gain from budget carrier subsidiary Tiger Airways, but it benefitted little from lower oil prices due to high jet fuel hedging and intense competition.

For the three months ended December 31, SIA earned a net income of S$202.6 million (RM531.267 million), up from S$50.1 million in the corresponding period a year earlier, the airline said in a statement filed with the Singapore Exchange after the market closed. Revenue grew 5.8 per cent to S$4.1 billion during the quarter.

“The improvement was primarily attributable to an S$56 million exceptional gain, compared with an exceptional loss of S$80 million last year (or a swing of S$136 million).

“Tiger Airways became a subsidiary during the quarter, upon which the group recorded a gain of S$120 million arising from the re-measurement of the group’s retained interest in Tiger Airways at fair value. This was partially offset by an S$64 million impairment loss on SIA Cargo’s 16 per cent investment in China Cargo Airlines,” SIA said.

However, group operating profit fell 2.6 per cent to S$147 million during the quarter, SIA said. If Tiger Airways — now 56 per cent owned by SIA — is excluded, the operating profit decline would be steeper, down 5.3 per cent to S$143 million, it added.

“While the decline in oil prices is generally positive for the airline industry, hedging and competition will limit the effect on the group’s earnings,” said SIA in the statement.

“The group had hedged 65 per cent of its jet fuel requirements at an average price of US$116 per barrel, leading to a hedging loss of S$216 million, compared with a gain of S$48 million last year, so the average jet fuel price after hedging was 1.9 per cent lower year-on-year. However, this benefit was more than offset by the stronger United States dollar against the Singapore dollar,” it added.

Mr Ellis Taylor, Asia finance editor of aviation information provider Flightglobal, said: “Quite a number of airlines had hedged a bit too much and this is probably going to take a good six months or so to play out.”

Besides the jet fuel hedging loss, the main impact would be from the currency movements, he added.

Global oil prices have more than halved since the high last June, when the levels were roughly where SIA had hedged on average. Sounding a pessimistic note in its outlook, SIA said falling oil prices may be a reflection of the slowdown in global economic activity, which may ultimately have a negative effect on air travel demand.

Chinese New Year travel boosted bookings for the January-to-March quarter, but SIA said: “Competition remains intense … and efforts to stimulate demand in weaker markets will keep yields under pressure.”

But they are not all headwinds. The International Air Transport Association (IATA) said yesterday that global passenger demand rose 5.9 per cent last year, while capacity increased 5.6 per cent, boosting load factor 0.2 percentage point to 79.7 per cent.

All regions saw demand grow last year, IATA said, adding that more than half of the growth in passenger travel was on airlines in emerging markets including the Asia-Pacific and the Middle East.

Mr Taylor said SIA is in a good position to tap this growth, having a lot of exposure to growing markets such as Indonesia and China. The bigger challenges are in Europe, where it faces intense competition, as well as in the Middle East, he added.

With aviation safety under the spotlight after a spate of disasters, the latest being Wednesday’s TransAsia crash in Taiwan, SIA told TODAY it is working with global air transport communications firm SITA on trials related to aircraft tracking.

An SIA spokesman said the airline currently tracks the position of all its aircraft regularly, using systems such as ACARS, or Aircraft Communications Addressing and Reporting System, as well as surveillance data. — TODAY