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Singapore Airlines (SIA) is expected to avoid posting its first loss when it unveils its financial results for the past year today.

Analysts believe SIA will announce an attributable profit of S$290 million (about HK$1.25 billion) to S$407 million, sharply lower than the S$1.54 billion net profit it achieved the previous year.

By contrast, Cathay Pacific Airways, Hong Kong's leading airline, posted a HK$662 million loss in the second half of last year.

There had been fears that the combination of a global recession - and one of Singapore's worst economic downturns - along with the collapse in air travel following the terrorist attacks in the United States on September 11, would tip the largest airline in Southeast Asia into red ink.

'One of the main stories in the Singapore media earlier in the year was speculation as to whether SIA would fall into loss for the first time in its history,' a Singapore-based airline analyst said.

'I think that if SIA had not taken drastic action, as it did, in cutting operating costs and service capacity, then it may very well have lost money for the year. The improvements in traffic performance have, so far, not been enough to cover up for the post-September 11 troubles.'

SIA has also been burdened by its associates, having had to write-down its investment in Air New Zealand by S$237 million at the half-year mark. The presence of Virgin Atlantic, controlled by Sir Richard Branson, continues to raise questions on SIA's overseas expansion strategy.

SIA's net profit for the six months to September fell more than 88 per cent to S$134.8 million.

Earlier this month, SIA and Sir Richard jointly announced a GBP25 million (about HK$282.34 million) recapitalisation of Virgin.

Salomon Smith Barney regional aviation analyst Tiffany Co said: 'Virgin is a black box as far as SIA's finances are concerned. No one knows how Virgin is faring, given that the Atlantic business collapsed [after September 11].'

SIA's passenger traffic and load factors had dramatically improved from September to December lows, when they fell nearly 19 per cent over the same period a year earlier.

The carrier last month said that average load factor in the first quarter was about 73 per cent, up from 69.53 per cent a year earlier and much better than the 67.73 per cent average in the quarter to December.

Cathay chief executive David Turnbull said SIA was helped by the difference in timing of its reporting period, which ends in March, relative to Cathay's December year-end.

'[For Cathay's last set of results], we took the full brunt of the difficulties in September, October and November. Had our year-end been the same as SIA's, we would have had a different result,' Mr Turnbull said.

Yet, cost savings arising from across-the-board salary cuts of between 7 per cent and 15 per cent, an accelerated early retirement programme and a reduction in capacity of between 7 per cent and 10 per cent between January to March, are key reasons why analysts expect SIA to have remained profitable during the year.

At the same time, SIA benefited from a timely change in depreciation policy for its fleet of aircraft.

Under the new accounting policy which took effect in May last year, the carrier's aircraft depreciate over 15 years instead of the previous 10 years, which SIA said would boost its bottom line by about S$265 million for the first year.

SIA chief executive Cheong Choong Kong helped quash fears of a full-year loss last month when he indicated that net profit would be at least S$200 million and told airline staff they could expect a partial restoration of their wage cuts.

Under an agreement with its unions, the airline pledged to restore half of the wage cuts if net profit for the year exceeded S$200 million. Mr Cheong said wages would be fully restored if net profit exceeded S$350 million.



SIA seen avoiding first loss after cost cutbacks