Singapore Airlines shares fall more than 8% after first-quarter profit plunges

Shares of Singapore Airlines plunged after the carrier reported a 59% decline in earnings for the first quarter of its financial year.

SIA stock fell more than 8% and logged the largest intra-day decline since August 2024, data from LSEG showed. It is currently trading 7.11% lower.

Net profit fell to 186 million Singapore dollars ($144 million) for the quarter ended June 30, according to the company's earnings report. The drop was attributed to reduced interest income and losses from its associates.

Its operating profit in the first quarter also fell 13.8% to S$405 million year over year.

Stocks of Singapore Airlines fall over 8% after first quarter profit plunges

Singapore's flagship carrier also noted that the loss stemmed from Air India's financials, which were not included in the group's results for the same quarter in 2024.

SIA has a 25.1% stake in Air India following its November 2024 merger with rival Vistara, which it co-owned with India's Tata Sons. SIA began equity accounting for the airline from December 2024.

"Air India losses were significantly deeper than expected and are unlikely to ease in the near term as the airline navigates a complex restructuring alongside reputational damage," Tabitha Foo, equity research analyst at DBS Bank, told CNBC.

"Following the [Boeing] Dreamliner incident in June, Air India reportedly saw a 20% drop in bookings across domestic and international routes," she said, adding that average fares dropped 8% to 15% while cancellations rose, especially among corporate and premium leisure travelers.

Foo noted that most of the costs associated with the crash of Air India Flight 171 should be covered by insurance.

Yet, "Air India is still likely to remain a near-term drag on SIA's bottom line," she said.

The negative pull by Air India's financials isn't surprising, said Brendan Sobie, an independent analyst at Sobie Aviation.

He noted that the Vistara-Air India merger helped boost net profits for SIA Group to a record S$2.78 billion in the previous financial year, which ended in March.

"In this latest quarter, you now have a net loss from Air India. It's just impacting the net figures," he said. "The operating figures ... provide a better indication of how SIA and the market here are doing."

Singapore Airlines' operating margins are normalizing from pandemic highs as competition rises, said Lorraine Tan, director of equity research at Morningstar.

"Passenger capacity [is] ramping up as fleets grow," she said. "This remains the key challenge to the group's operating margins over the next few years. The soft oil prices will help mitigate rises in other costs."

SIA noted that demand for air travel and cargo "remained strong" despite geopolitical uncertainties. However, cargo revenue fell by nearly 2%, as cargo load growth lagged capacity expansion, the latest earnings' results show.

"The demand for air travel remains healthy in the second quarter of FY2025/26 across most route regions due to the traditional summer peak," the company noted. However, the global airline industry continues to grapple with a "volatile" operating environment, including geopolitical developments.

SIA noted that while tariffs stemming from the U.S. trade war have led to unpredictable and uncertain demand for its cargo business, its "diversified network and verticals reduce its exposure to specific regions or market segments."

"The SIA Group is well-positioned to maintain its industry-leading position, thanks to its robust foundations – a strong balance sheet, digital capabilities, and a talented and dedicated workforce," the flag carrier of Singapore added.

However, Maybank cited SIA's weaker cargo demand and higher operating costs as reasons for reducing its profit estimates for the carrier by 25–29% over the next three years.

"We think the share price has run ahead of its fundamentals and downgrade SIA to SELL," said Maybank's investment analyst Eric Ong, who added that the stock still looks "too expensive" relative to the firm's actual performance.

Maybank's fresh target price is S$6.75 per share, compared to its current price of S$7.08.