Singapore Airlines on Friday flagged its earnings would stay under pressure despite robust travel demand in the second half of the year, while it reported a profit fall reflecting stiff market competition coupled with rising costs.

The city-state's flag carrier said the aviation sector was struggling with macro-economic uncertainty, rising geo-political tensions, inflationary cost pressures and increased competition.

"The Group will remain nimble and agile, adjusting its passenger network and capacity to match evolving demand patterns," the airline said while signalling a healthy air freight demand heading into the year-end peak.

Singapore Airlines Group includes the flag carrier and budget airline Scoot.

Singapore's leading airline operator posted a 48.5% plunge in net profit to S$742 million ($561.65 million) for the April-September period and declared an interim dividend of 10 Singapore cents per share. The group reported net profit of S$1.44 billion a year ago.

SIA's total expenses rose to S$8.70 billion for the half-year ended Sept. 30, a 14.4% rise, due to a jump in both fuel and non-fuel costs, while its passenger yield, a proxy for air fares, fell 5.6% in the first half.

Revenue rose by 3.7% from a year ago to S$9.50 billion.

Passenger load factor - a measure of how many seats are filled on planes - was 86.4% in the first half for the group as a whole, compared with 88.8% a year earlier.

"Increased capacity and stronger competition in key markets led to yield moderation, resulting in lower operating profit," Singapore Airlines said.

Airlines globally have ramped up the number of flights and routes to cater to robust air travel demand, which has resulted in increased competition, putting pressure on ticket prices and squeezing profit margins.

Analysts at Morningstar have flagged in a note that the rise in international capacity by global airlines had begun to be reflected in increasing competition.

AIR INDIA-VISTARA MERGER PROGRESS

Singapore Airlines said it will record a non-cash accounting gain of S$1.1 billion once the Air India-Vistara merger completes, which the firm expects by November.

Singapore's flagship carrier announced a plan to merge the decade-old Vistara and Tata-owned Air India in November 2022, in a bid to create a dominant full-service airline in the domestic and international markets.

Singapore Airlines (SIA), which is set to get a 25.1% stake in Air India, will inject S$498 million into the new combined entity, through subscription of new Air India shares.

 - Reuters