Global financial crisis continues to hit airlines

Singapore Airlines, the wealthiest of the world’s carriers, has been hit by the economic downturn affecting the industry, reporting its largest decline in profitability since the Asian financial crisis, according to a report in the Sun Herald.

For the first quarter of its financial year, the airline saw a drop of 36 per cent in profits, as well as lower bookings heading into January.

This was the carriers’ worst quarterly performance since 2005, caused by the high cost of fuel and decreased passenger demand. The results also demonstrate that Singapore Airlines is not impervious to the financial realities that have caused the collapse of more than two dozen carriers around the world this year.

Conditions have been equally unfavourable for Airbus and Boeing, as analysts are predicting that the slowdown among airlines will lead to aircraft manufacturers being forced to mothball unsold planes in the desert, safeguarding them against corrosion.

At a Hong Kong aviation conference, banks and leasing companies discussed the possibility of pulling back from the aviation industry. If that were to occur, the aviation market would be left with a gap in funding of as much as $US20 billion, and see airlines defaulting on their orders for 200 new planes.

Carriers such as Emirates, Korean Air Lines, MAS and Qantas have all acknowledged that they are financially-strapped, and have reduced services and grounded aircraft.

Hong Kong’s largest airline, Cathay Pacific, has warned that its next announcement of results would be disappointing because of a slowdown in demand and hedging losses.

www.singaporeair.com