Straits Times, Saturday, 15 May 2004
SIA reports full-year net profit of $849m
Staff will get back cut wages, 15% extra payment and 2.05-month bonus; Sats to remain within group
By Karamjit Kaur
SINGAPORE Airlines (SIA) rebounded from its first quarter loss to report a net profit of $849 million for the year ending March 31.
The news cheered its staff, who will receive next month what they have lost in wage cuts over the past year, as well as an additional 15 per cent. The total payout will be $78 million.
Employees will also get a 2.05-month bonus, said chief executive Chew Choon Seng, chairing his first full-year results briefing at the Singapore Expo yesterday.
Mr Chew, who met the media and analysts first, had more good news for staff gathered at a separate hall - Singapore Airport Terminal Services (Sats) will remain in the group, which also comprises SIA Cargo, regional carrier SilkAir and SIA Engineering.
The decision comes about a month after Senior Minister Lee Kuan Yew said at a meeting with SIA management and union leaders that SIA can hive off parts of its business as it restructures in the next six to 18 months. He singled out Sats as a likely candidate for divestment.
Yesterday, Mr Chew said that 'at this point in time', retaining Sats is in the group's 'best interests'.
The catering and ground handling company posted earnings of $189.8 million for the year, a drop of 11.6 per cent compared to the 12 months before that.
Still, its earnings made up 28 per cent of the group's profit. The airline's share was 22 per cent.
The biggest contribution of 30 per cent came from its cargo arm, which operates a fleet of 13 Boeing 747-400 freighter planes and sells space in its passenger craft.
Mr Chew said: 'Cargo escaped relatively unscathed from the effects of Sars.'
The virus resulted in the group's first ever loss of $312 million for the three months from April to June last year, and forced it to lay off 596 staff and offer retirement packages to 145.
Those left had to take compulsory unpaid leave and wage cuts of between 5 and 16.5 per cent.
But recovery came fast and strong, said Mr Chew, adding that the group's performance from July last year to March this year 'gives a better flavour of the numbers with the Sars factor taken out'.
In those months, earnings were in excess of $1 billion, almost 100 per cent more than the same nine months in the previous year.
But the company's first quarter performance pulled full-year net profits about 20 per cent lower than the $1.06 billion earned the year before that.
Shareholders are not complaining though. They will pocket a dividend of 25 cents per share, higher than last year's 15 cents.
Mr Chew explained that since staff are being rewarded with the lump-sum payment and bonus, the board felt it should 'also be fair to shareholders' and reward them 'for their patience'.
Analysts are projecting earnings in excess of $1 billion for the current financial year, which ends in March next year. But they warned of increasing competition from budget carriers and the 'sky-high' prices of jet fuel this financial year.
While other airlines like Qantas and British Airways have imposed a fuel surcharge on ticket prices, SIA has so far resisted this.
SIA is also concerned about the threat from budget airlines, and warned that yields on its short-haul flights will come under pressure.
An analyst at Standard and Poor's Asian Equity Research, Mr Vincent Ng, said: 'The oil factor will be a major challenge for SIA... but the group is in a better position now to tackle what's ahead.'
One goal is to cut annual costs by up to $1.6 billion.