Singapore Airlines Q2 Net Profit Plunges, Revenues Rise; Plans Interim, Special Dividends

Singapore Airlines (SIA) reported a sharp 82.1% decline in Q2 net profit to S$52 million, primarily due to lower interest income and associated company results, despite a 22.5% increase in operating profit to S$398 million and a 2.2% rise in total revenue to S$4.89 billion driven by resilient passenger traffic. The airline declared an interim special dividend of 3 cents per share, part of a S$0.9 billion three-year package, alongside an interim dividend of 5 cents per share, while forecasting continued strong air travel demand into Q3 FY2025/26 but uncertainty in the air cargo segment.

Analysis

Singapore Airlines (SIA) reported a significant divergence in its Q2 FY2025/26 financial performance, with net profit sharply declining by 82.1% to S$52 million, primarily attributed to lower interest income and reduced share of associated companies' results. Concurrently, operating profit increased by 22.5% to S$398 million, driven by a 2.2% rise in total revenue to S$4.89 billion, indicating robust core operational performance despite external financial factors impacting the bottom line.

Passenger flown revenue grew 2.2% to S$3.92 billion, supported by a 5.1% increase in passenger traffic, although this was partially offset by weaker yields. Conversely, the air cargo segment experienced a 3.7% decline in revenue due to lower loads and yields, with the company noting continued uncertainty in this area amid shifting trade policies and market dynamics.

Looking ahead, SIA projects resilient air travel demand into Q3 FY2025/26, bolstered by the year-end peak season. The Board also declared an interim special dividend of 3 cents per share, as the first payment of a S$0.9 billion three-year package, alongside an interim dividend of 5 cents per share, signaling a strong commitment to shareholder returns. These dividends are payable on December 23 to shareholders as of December 8.

Key Decisions for Investors

• Investors should differentiate between the strong operational performance and the non-core factors impacting net profit, focusing on the sustained growth in passenger traffic and operating profit.
• Monitor the air cargo segment closely for further deterioration or stabilization, as its uncertainty could pose a headwind despite strong passenger demand.
• Consider the declared interim and special dividends as a positive signal for shareholder value and confidence in future cash flows, indicating a robust capital return policy.