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July 29, 2008

Singapore Airlines: Margins face pressure from fuel cost
Singapore Airlines, the world's No. 2 airline by market value, expects further pressure on its profit margins from the high cost of jet fuel, despite hedging up to 60 percent of its needs in the futures market, reported Reuters.

"We regularly hedge 30 to 60 percent of our requirement as part of our operations," the news agency quoted Singapore Airlines Chairman Stephen Lee as telling shareholders at the annual generaal meeting.

The group's Chief Executive Chew Choon Seng said he expected operating margins to narrow as a result of record fuel prices.

"Going forward, given what we have seen unfolding in the global economy and the pressure on costs for fuel, I think the operating margin is going to be narrower...We have seen signs of it already," Chew said.

The carrier, 55-percent owned by sovereign fund Temasek Holdings, on Monday reported first-quarter profit at dropped 15 percent due to costlier jet fuel but earnings from partners helped it beat market expectations.

The airlines on Tuesday morning said it intended to keep paying investors an annual dividend of S$1 ($0.73) a share despite increasing cost pressure on its business.

"The decision was made at a time when we could not really foresee that oil prices would shoot up so strongly. But even with that qualification the intention is to maintain it at S$1. We'll try our best," Singapore Airlines Chairman Stephen Lee told shareholders at the annual general meeting.

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