Singapore Airlines remains profitable in 2Q but yields drop again amid intensifying competition

(updated following 13-Nov-2013 analyst briefing to include additional comments on SIA yields, Scoot and joint venture with Tata)

Singapore Airlines (SIA) has reported higher profits for the three months and fiscal first half ending 30-Sep-2013. But the carrier's operating margin was once again low, particularly by SIA standards, as it continues to see a drop in yields.

Market conditions for SIA remain unfavourable. Competition in Southeast Asia has been intensifying while the cargo and long-haul passenger markets remain relatively weak. But the group has been trying to position itself for higher growth and profitability over the long term through a series of major strategic changes.

The last of several major strategic initiatives came towards the end of the most recent quarter as SIA unveiled plans to launch a joint venture full-service carrier in India with Tata. The new Indian carrier, which is expected to launch in 2014, follows the 2012 launch of Singapore-based long-haul low-cost carrier Scoot and an acceleration of expansion at regional full-service subsidiary SilkAir. Scoot is not yet profitable and SilkAir has seen its profitability decline in recent months but over the long-run the SIA Group will have a stronger portfolio with a potential for a return of higher profits.