Boeing Max grounding to cause significant costs at Singapore Air

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SINGAPORE (May 17): Singapore Airlines Ltd predicts “significant” costs this year as the carrier incurs extra expenses to lease planes due to the indefinite grounding of Boeing Co 737 Max aircraft.

Southeast Asia’s largest airline will lease 10 to 12 Airbus SE A320 family narrow-body planes, Chief Financial Officer Stephen Barnes said at a briefing in Singapore Friday. It’s also extending some existing aircraft leases to cope with the idling of the Max as well as 787 planes due to faulty Trent 1000 engines used in the bigger aircraft.

The additional costs cast another dark cloud over the carrier following a 28% profit drop in the fourth quarter due to cargo volumes that were hurt by the US-China trade spat. While passenger demand remains “fairly strong” across all travel classes, the company warned Thursday in its financial report that headwinds from higher oil prices could weigh on fares.

Chief Executive Officer Goh Choon Phong said Singapore Air is keeping its orderbook of 31 737 Max aircraft. The planes are used by its regional SilkAir brand, which currently has six of the jets in its fleet, all grounded.

SilkAir is being folded into the main airline as part of a company revamp that was announced last year. It’s too early to tell whether the Max grounding will affect the integration of SilkAir, Goh said.