Singapore Airlines Faces Profit Decline Amid Rising Fuel Costs

Singapore Airlines (SIA) announced on Thursday that its annual profit for the fiscal year 2026 has decreased by 57.4 per cent, reflecting ongoing challenges from surging fuel costs linked to geopolitical tensions in the Middle East. The annual profit decline has been compounded by losses from Air India, in which the airline holds a 25.1 per cent stake. In its earnings report, SIA noted that the impacts of increased fuel expenses are expected to worsen in the coming year, with costs only partially accounted for due to the airline's pricing structure.

The airline's fiscal performance captured data prior to the latest regional conflicts, specifically before the US-Iran tensions escalated. Following the outbreak of the US-Israeli war against Iran in late February, jet fuel prices have surged, significantly affecting the airline industry's operational costs. SIA's statement indicated that while they raised airfares to mitigate some of these costs, such adjustments were insufficient to fully offset the impact of higher fuel prices, which represent the airline's largest single expense.

For the fiscal year 2026, SIA's net profit totaled S$1.18 billion (approximately US$927 million), surpassing some market expectations as noted by analysts from Visible Alpha, who had predicted a profit of S$1.08 billion. Operating profits, meanwhile, have risen robustly, climbing 39 per cent thanks to strong demand for air travel. The airline served a record 42.4 million passengers this year, with revenues per passenger showing recovery in the latter half of the year.

Despite this strong passenger traffic, SIA faced a notable decline in its overall profitability affected by the absence of a S$1.1 billion one-time gain from the previous fiscal year. Last year, the profit was artificially boosted due to the integration of its joint venture, Vistara, into Air India. Losses from Air India during the current fiscal year have contributed a significant S$945.2 million loss to SIA’s financial standing, increasing the financial strain on the airline.

Looking ahead, analysts have acknowledged that while yields—the revenue per passenger kilometer—are expected to grow for the full-service carrier, this increase may not sufficiently counterbalance the rising fuel costs. "We expect yield performance to remain robust, but meaningful margin compression is likely as the pressure from fuel costs persists," stated DBS equity research analyst Tabitha Foo.

SIA's management expressed concern regarding the ongoing situation in the Middle East, highlighting potential implications for supply chains and broader economic conditions, which may affect passenger demand. The airline also announced a final dividend of 22 Singapore cents per share and a special dividend of 7 Singapore cents, attempting to provide returns to shareholders despite the dip in profits.

Overall, Singapore Airlines is navigating a challenging environment characterized by rising operational costs, geopolitical uncertainties, and record passenger demand, which complicate its financial outlook for the forthcoming year.