By Kimberley Kao

Singapore Airlines shares were sharply lower after reporting a slump in profits due to increased competition and higher fuel costs.

Shares fell as much as 6.2% early Monday before paring its losses. They were last 4.0% lower at 6.19 Singapore dollars.

The city-state's flag carrier said Friday that net profit in the three months ended September fell 59%, compared with the same period a year earlier, to 290 million Singapore dollars, equivalent to US$219.7 million. Its operating profit also fell 59%, though revenue rose 2.0% to S$4.78 billion. Net fuel costs rose 11%.

It attributed the soft results to a weaker operating performance and lower net interest income.

At a media and analyst briefing Monday, chief executive officer Goh Choon Phong said the intensifying competition came "largely from the additional capacity that has been injected in the industry," which weighed on yields.

He added that SIA was among the first to add capacity when the borders began opening up globally after the Covid-19 pandemic to capture "the pent up demand at that point in time." That made the past two financial years' performances high benchmarks when comparing yields and profits.

SIA said that yields are expected to continue moderating but so far have remained above pre-Covid levels, adding that the airline won't hold back capacity growth because of competition.

The carrier expects delays in the delivery of Boeing 777 aircraft, and expects them to come in 2026. SIA now sees 204 jets in operation by the end of the financial year compared with the 209 it earlier estimated.

Citi analysts believe the earnings likely disappointed markets, as interim core profits for April-September period, the first half of its financial year, only came up to 37% of full-year consensus estimates, they said in a note. Some investors also expected ticket prices to hold up but prices in this latest quarter declined further compared with the two previous quarters, Citi said. It retains a neutral rating on the stock with a target price of S$6.76.

SIA's results missed expectations, as passenger capacity expansion outpaced traffic growth, resulting in higher than estimated costs, DBS Group Research analysts said in a note.

The headwinds from sticky inflation and supply chain issues are likely to stay in the near-term, and the operating environment remains challenging given fierce competition and falling passenger pricing, DBS said.

Write to Kimberley Kao at kimberley.kao@wsj.com

(END) Dow Jones Newswires

November 10, 2024 22:53 ET (03:53 GMT)

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