SINGAPORE — Flag carrier Singapore Airlines (SIA) Group reported yesterday a 35.5 per cent jump in net profit for the third quarter as lower fuel prices and cheaper airfares helped it attract more passengers, but cautioned that the operating environment ahead remains challenging amid intense competition.

Net profit rose to S$275 million (RM810.56 million million) in the quarter ended December, up from S$202.6 million a year earlier, SIA said in a stock exchange filing after market close. Operating profit during the period almost doubled to S$288 million from the previous year’s S$141 million.

Group revenue, however, declined by about 4 per cent to S$3.9 billion due to weaker passenger yields and cargo operations. Passenger yield — or money earned from carrying travellers each kilometre — declined 4.6 per cent while cargo yield fell 13.5 per cent.

“The headline profit figures here look good, but the fact that revenues were down over what would usually be a peak period is a cause for concern,” said Ellis Taylor, Asia finance editor of aviation information provider Flightglobal.

“SIA mentioned that yield — effectively a proxy for profit margin — was down, and that shows that the airline has not been able to pull ahead of the growing threat of the Middle Eastern carriers, which are competing against it on the key Asia Pacific-­Europe routes. The discounting of fares also seems to show that demand is not as strong as it has been, and that looks unlikely to get any better in the short term,” he added.

Given lower fuel prices, group expenditure fell by 7.6 per cent to S$3.7 billion. During the quarter, SIA saw a S$354 million reduction in net fuel costs as average jet fuel costs dropped 41.1 per cent, although this was partially offset by the strengthening of the US dollar against the Singapore dollar.

Hedging losses for the quarter stood at S$72 million. The group had hedged 54.6 per cent of the group’s fuel requirement for the quarter at a weighted average price of US$96 (S$134) per barrel. Jet fuel prices in Singapore have slumped 36 per cent over the past 12 months to US$43.55 a barrel, according to Bloomberg data.

For the fourth quarter between January and March this year, SIA has hedged 46.6 per cent of its fuel needs at US$90 a barrel, it said.

“The (third quarter) hedging losses ... were lower than expectations as SIA does not appear to have added hedges during the quarter. The overall performance of the airline is above expectations,” said UOB Kay Hian ­analyst K Ajith.

On top of an improved operating profit, there were higher gains of S$56 million from disposal of aircraft, primarily from SilkAir’s sale and leaseback of four 737-800s (S$52 million) and SIA Cargo’s disposal of a parked 747-400 freighter that fetched S$10 million.

These, SIA said, were partially offset by an absence of exceptional gains of S$56 million recorded in the third quarter in the previous financial year, higher tax expenses of S$41 million, impairment of aircraft to the tune of S$9 million and weaker performance of associated companies of S$7 million. Looking ahead, SIA said it expects travel demand to remain volatile due to economic forces and external events.

“Expansion of other full-service airlines, as well as low-cost carriers, particularly in South-east Asia, will continue to exert pressure on loads and yields,” it said. — TODAY