Singapore Airlines (SIA) is facing headwinds as its first-quarter net profit for the financial year 2025/2026 plummeted by 59% to S$186 million, a sharp decline from S$452 million in the corresponding period last year. This downturn is primarily attributed to losses from its associated companies, most notably Air India, coupled with reduced interest income.
The flag carrier of the city-state saw its shares tumble as much as 8.7% before paring some losses, ultimately dropping 7.1% to S$7.06, marking the biggest one-day drop since August 2024. The group's total revenue saw a marginal increase of 1.5% to S$4.79 billion. However, this was offset by a S$122 million hit from associated companies, a stark contrast to the profit recorded in the same quarter the previous year.
Air India's financial results were included in the Singapore Airlines Group's financial framework from December 2024, following the full integration of Vistara into Air India. In FY25, Air India reported a consolidated net loss of ₹10,859 crore ($1.2 billion), despite generating revenue of ₹78,636 crore. This marks the first full-year financial performance after consolidating four Tata group airlines into two: Air India and its budget subsidiary Air India Express.
Despite these losses, Air India's standalone loss dropped 21% year-over-year compared to FY24, while revenue rose by 13.5%. This momentum was driven by expanded flight capacity and an improved route network. The airline's operating profitability (EBITDAR) also grew 1.59 times over FY24, signaling operational improvements.
However, analysts are concerned about the depth of Air India's losses and believe they are unlikely to ease in the near term. One broker estimates SIA's share of Air India's losses at S$250 million for FY26F and S$200 million for FY27F, significantly wider than the previous S$75 million per annum. These losses may be partially attributed to one-off compensation provisions following the Boeing 787-8 crash at Ahmedabad on June 12, 2025.
Singapore Airlines and Scoot carried a record 10.3 million passengers, up 6.9% year-over-year. The group passenger load factor also increased to 87.6%. However, passenger yields slipped 2.9% to 10 cents per revenue passenger-kilometer due to heightened competition as more airlines added capacity.
The decline in net profit was also attributable to lower interest income on the back of lower cash balances and interest rate cuts. Fuel costs amounted to S$1.26 billion, a 7.9% reduction from the prior year, though the company faced a fuel hedging loss of S$60 million.
Looking ahead, Singapore Airlines anticipates healthy demand for air travel in the second quarter due to the traditional summer peak season. However, the airline foresees volatile times ahead, with uncertain demand in the cargo sector attributed to ongoing tariffs. The group plans to continue adapting its capacity to navigate these challenges.
Despite the lower quarterly profit, SIA Group's balance sheet remains strong. Shareholder equity reached S$15.8 billion, and total debt fell to S$11.5 billion. The group maintains access to S$3.3 billion in undrawn committed credit lines for added liquidity. However, cash and equivalents are expected to decline from S$12.679 million in March 2024 to S$1.266 million by March 2028, with net gearing increasing from 0.9% to 53.5% over the same period.
