Singapore Airlines earnings sink 82% in second quarter, well below forecasts on Air India drag

Singapore Airlines (SIA) reported an 82% plunge in second-quarter net profit to S$52 million, significantly missing estimates, largely due to a S$295 million loss from its 25.1% stake in Air India and lower interest income. This contributed to a 67.8% drop in first-half net profit. Despite resilient passenger demand and expanded partnerships, SIA noted persistent industry headwinds including geopolitical tensions, macroeconomic pressures, and uncertain air cargo trends.

Analysis

Singapore Airlines (SIA) reported a substantial 82% plunge in second-quarter net profit to S$52 million, significantly missing LSEG SmartEstimates of S$181.47 million. This underperformance contributed to a 67.8% year-over-year decline in first-half net profit, which fell to S$239 million. The results indicate a strong negative sentiment and moderate market impact.

The primary drivers for the earnings miss were a S$295 million hit from associated companies, notably its 25.1% stake in Air India, and a S$42 million reduction in interest income due to lower cash balances and interest rate cuts. Air India, which SIA began equity accounting for in December 2024, has been a consistent drag and is reportedly seeking S$1.1 billion in financial aid from its owners.

Despite these significant headwinds, SIA noted resilient demand for air travel heading into the third-quarter peak and expanded its commercial partnerships with Vietnam Airlines and the Lufthansa Group. However, the carrier warned of uncertain air cargo trends amid shifting trade policies and market volatility, alongside persistent industry challenges including geopolitical tensions, macroeconomic pressures, and inflationary cost pressures.

Key Decisions for Investors

• Investors should closely monitor the financial performance and integration of the Air India stake, given its significant negative impact on recent earnings and potential future capital requirements.
• Evaluate SIA's ability to effectively manage persistent industry headwinds such as geopolitical tensions, macroeconomic pressures, and uncertain air cargo trends, despite resilient passenger demand.
• Assess the long-term benefits of SIA's expanded commercial partnerships and network growth against the backdrop of current profitability pressures and broader market volatility.