Shares in Cathay Pacific and Singapore Airlines (SIA) fell 5.9% and 4.3% yesterday, as SIA unveiled a 92% slump in fourth quarter profit and warned fare discounting and a drop in premium bookings would continue to affect revenues. Cathay told a similar story earlier in the week, noting the slump in demand for premium traffic “continued unabated across the network” last month, “and this, combined with lower fares and adverse currency movements, again placed significant downward pressure on yields”.
Singapore Airlines’ passenger yield slumped 5.6% and its cargo yield dropped by close to 30% in the three months ended 31-Mar-09. In morning trading in Singapore, SIA stock is up around 3% at SGD12, following announcement of an 'in specie' dividend of "up to" 730 SATS shares for every 1,000 Singapore Airlines shares held - see press release below.
Meanwhile, Qantas’ shares fell 2.5% and Virgin Blue dropped 3.6% as the ASX200 Index slumped 3.4%.
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Asia Pacific selected airlines daily share price movements (% change): 14-May-09
Singapore Airlines is proposing a dividend in specie to its shareholders of the Company’s entire shareholding in Singapore Airport Terminal Services (SATS). The proposed distribution is subject to approval from Singapore Airlines shareholders at an extraordinary general meeting to be convened on 31 July 2009 and other regulatory approvals. Under the Proposal, shareholders will receive up to 730 SATS shares for every 1,000 Singapore Airlines shares held.
Distributing shares through an in specie dividend will unlock shareholder value by giving Singapore Airlines shareholders direct ownership of SATS at no cost to them. The proposed distribution will allow Singapore Airlines to concentrate on its airline and aircraft maintenance, repair and overhaul businesses.
SATS, on the other hand, will be able to independently pursue opportunities to lessen its dependence on the aviation business. The Proposal will improve trading liquidity of SATS shares, potentially enhancing value.
The relationship between Singapore Airlines and SATS will continue under agreements concluded recently. Singapore Airlines’ ground handling and inflight catering at Singapore Changi Airport will be provided by SATS for another three years from 1 October 2009; with an automatic extension for a further two years unless either party terminates the agreements by giving prior notice.