Singapore Airlines (SIA) posted its highest ever annual profit on Wednesday, as robust demand for air travel drove record passenger revenue and load factors.

Net profit improved due to better operating performance, coupled with lower expenses related to tax, the city-state's flag carrier said in its statement.

But the airline services provider also said its expenditure increased in the second half of the year, as a result of higher net fuel costs.

SIA posted net profit of S$2.68 billion ($1.99 billion) for the year ended March 31, compared with S$2.16 billion a year ago.

The company also proposed a final dividend of 38 Singapore cents per share, up from 28 Singapore cents declared last year.

($1 = 1.3486 Singapore dollars) (Reporting by Shivangi Lahiri and Aaditya Govind Rao in Bengaluru; Editing by Shilpi Majumdar)