Earnings tumble as airlines face new turbulence

SINGAPORE, November 6, 2011 (AFP) – Hefty falls in earnings for aviation giants Singapore Airlines and Emirates are the clearest signs yet of fresh turbulence just three years after the 2008 financial crisis wreaked havoc, analysts said. The two companies, regarded as among the industry’s most well-managed carriers, cited escalating fuel expenses and growing unease over the global economy as the main drag on profits.

Both airlines rely heavily on intercontinental passenger and cargo traffic to drive earnings and the decline in profits announced Thursday reflects the severity of the situation facing the sector, analysts said.

“The global airline sector is definitely under pressure right now from both fuel prices and economic volatility,” said Jonathan Galaviz, managing director of Galaviz and Company business consultancy.

“There is no question that the global economic volatility over the last quarter has created heartburn for the global airline industry,” he told AFP.

Singapore Airlines (SIA) announced Thursday that net profit in the six months ended September dived 62 percent on-year to Sg$239 million ($188 million), and cautioned earnings remained under pressure from high fuel prices and anaemic global growth. “The pr