Why Singapore Airlines FY2025/26 Profit Dropped Despite Record Travel Demand

Deciphering SIA’s $1.1 Billion Accounting Turbulence

For the financial year ended 31 March 2026, Singapore Airlines (SIA) presents a striking “High-Altitude Paradox.” Operationally, the carrier is at peak performance, having transported a record 42.4 million passengers—a 7.7% year-on-year increase. However, the headline financials tell a seemingly grimmer story, with net profit attributable to owners plunging 57.4% to $1,184 million.

For the sophisticated investor, the question is whether this decline represents a fundamental breakdown in the business model or merely a period of heavy “financial lifting” required for its long-term Indian expansion. As we peel back the layers of this report, the data suggests a story of robust core operational health masked by significant non-cash accounting movements and integration headwinds.

The Net Profit Mirage

The 57.4% drop in net profit is a classic accounting “mirage.” It is critical to recognize that the previous year’s (FY2024/25) results were inflated by a massive one-off gain. Specifically, the completion of the Air India-Vistara merger in November 2024—within the prior financial year—resulted in a non-cash accounting windfall that was never going to repeat.

As stated in the Group’s Performance Review:

“The Group’s net profit declined by $1,594 million (-57.4%) to $1,184 million, primarily due to the absence of the $1,098 million non-cash accounting gain recognised in November 2024 upon the completion of the Air India-Vistara merger.”

While the net profit fell, the Operating Profit—the truest measure of the airline’s core business—actually rose by a stellar 39.0% to a record $2,375 million. This operational strength was driven by a Passenger Load Factor of 87.7% and Passenger Yields of 10.4 cents per RPK. Even the cargo sector showed resilience, with a Cargo Load Factor of 56.3%, as load growth of 1.7% slightly outpaced capacity expansion.

The Air India Integration Tax

SIA’s 25.1% stake in the newly merged Air India is currently functioning as a significant integration tax. For FY2025/26, SIA’s share of losses from Air India reached $945.2 million, contributing to the swing in the “share of results of associated companies” from a profit last year to a net loss of $828.5 million this year.

Independent auditors identified this investment as a “Key Audit Matter” due to a carrying amount of $1,134.6 million and indicators of impairment—specifically “challenging operating conditions and heightened geopolitical uncertainty.” However, a vital takeaway for investors is found in the auditor’s findings: “The recoverable amount exceeded the carrying amount of investment in AI.” This suggests that while the P&L is taking a hit today, the underlying value of the Indian market entry remains intact, and a major write-down is not currently projected.

A Visual Breakdown of Performance

The following table highlights the divergence between core operational success and the bottom-line accounting reality.

Metric	FY2025/26 ($ million)	FY2024/25 ($ million)	% Change
Total Revenue	20,522	19,540	+5.0%
Total Expenditure	18,148	17,831	+1.8%
Operating Profit	2,375	1,709	+39.0%
Net Profit	1,184	2,778	-57.4%
Net Fuel Cost	5,025	5,386	-6.7%

Note the significant operating leverage achieved here. Total expenditure rose only 1.8% despite a 7.7% increase in passengers. This demonstrates exceptional cost discipline and productivity amidst inflationary pressures.

The Impending Fuel Lag

Investors should view the 6.7% decrease in net fuel costs with caution. This “saving” was driven by a 5.6% contraction in full-year average fuel prices and higher hedging gains. However, jet fuel is typically priced on a lagged basis.

Management has signaled that the higher price environment triggered by the Middle East conflict was only partially reflected in the March 2026 costs. The “full impact” of these higher prices is expected to feed through into the FY2026/27 reporting period. Current fuel “savings” are a temporary buffer, not a structural trend.

The Dividend Reality Check

SIA’s dividend policy continues to reward patient shareholders, even as the total payout slightly retracted from $1,207.2 million to $1,166.1 million. The total distribution for the year was 37 cents per share, compared to 40 cents in the prior year.

Crucially, this 37-cent payout includes Special Dividends (3 cents interim and 7 cents final). From an analyst’s perspective, issuing special dividends while net profit is ostensibly “crashing” is a clear signal from management. They view the Air India losses as non-core accounting items and the underlying cash flow as robust enough to sustain high-level capital returns.

Shareholder Dilution via Convertible Bonds

A significant shift in the balance sheet occurred with the conversion of convertible bonds, leading to a $916 million increase in share capital and the issuance of over 178 million new shares.

While this expansion of the share base contributed to a drop in Earnings Per Share (EPS)—falling from 89.3 cents to 38.4 cents—it served a vital strategic purpose. The conversion directly strengthened the balance sheet and reduced the Group’s interest burden. Finance charges fell to $334.5 million from $395.5 million the previous year, providing a long-term buffer against rising interest rates.

Navigating the Turbulence

The investment thesis is currently a race between operational excellence and external volatility. Is SIA’s record-breaking operating profit and passenger volume enough to offset the ongoing geopolitical risks and the heavy financial lifting required to stabilize Air India? For now, the core engines are firing on all cylinders, but the financial flight path remains subject to significant crosswinds.

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