Singapore Air Profit Beats Estimate on Virgin Stake Sale

Singapore Airlines Ltd., Asia’s most valued carrier, reported profit that beat estimates as gains from the sale of its stake in billionaire Richard Branson’s Virgin Atlantic Airways Ltd. helped mask an operating loss.

Net income fell to S$27 million ($22 million) in the quarter ended March from S$68.3 million a year earlier, the carrier said in a statement to the Singapore stock exchange today. That exceeded the S$8 million average of four analysts’ estimates compiled by Bloomberg.

Singapore Air reported a S$31.6 million in one-time gain from the Virgin Atlantic sale, which was announced in December 2012 and profit from it booked previously. That masked a wider operating loss from carrying passengers and cargo as competition with a dozen budget airlines across the Asia-Pacific region and with Emirates for premium travelers hurt profit margins at the city-state’s flag carrier.

In December 2012, Delta Air Lines Inc. agreed to buy the 49 percent stake Singapore Air held in Virgin Atlantic for $360 million. The Asian carrier, which had held that stake since 1999, had said last year it had a net gain of S$336 million from the sale of the stake.

The shares fell 0.3 percent to S$10.25 at the close of trading in Singapore before the earnings announcement. The stock has dropped 1.5 percent this year. Nine of 21 analysts recommend investors buy the stock, according to data compiled by Bloomberg. Three say sell and nine suggest holding the stock.

Operating Loss

Operating loss widened to S$60.3 million from S$44.2 million even as fuel costs, the carrier’s biggest expense, declined in the quarter. Both the airline and its cargo unit had operating losses in the period, according to the statement.

The airline also had a one-time impairment of S$5.4 million and took provision for penalties incurred by its cargo unit of S$6.4 million, according to the statement.

In his response to competition, Chief Executive Officer Goh Choon Phong ordered $17 billion of new widebody planes and set up a venture with Tata Group to start an airline in India, the world’s second-most populous country.

“Singapore Air has a lot to spend this year with the India venture,” said K. Ajith, an analyst at UOB-Kay Hian Pte. in Singapore. “We need to see how they are going to manage that and the earnings as well.”

The carrier proposed to pay a dividend of 11 Singapore cents and a special dividend of 25 Singapore cents, according to the statement.

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