Flag carrier Singapore Airlines (SIA) warned in a filing with the city-state’s stock exchange on Friday (8 May) that the fallout from the COVID-19 global pandemic will likely push the airline group into its first-ever net loss for the year. The SIA group, which includes SIA, regional carrier SilkAir and budget carrier Scoot, said in its filing that it expects to report a “material operating loss for the final quarter of FY2019/2020”, but with strong results for the first nine months of the financial year, the group expects to report a small operating profit, “but a net loss for full year FY2019/2020”.
“The COVID-19 pandemic continues to have a severe impact on air travel, as border controls and travel restrictions remain in place around the world,” SIA said in the filing. “This has affected the entire global aviation industry, and the SIA group has not been spared either, with the impact on the SIA group exacerbated by the lack of a domestic market for it to fall back upon. To address this collapse in demand, SIA and SilkAir have extended their combined capacity cuts of approximately 96 percent until the end of June 2020, while Scoot is expecting capacity cuts of approximately 98 percent.
SIA also said it ran into trouble with its fuel hedging strategy as a result of the global collapse in oil prices. “The unprecedented scale of the capacity cuts by the SIA group as a result of COVID-19 has also resulted in the SIA group being in an over-hedged position”.
Download the SIA Group SGX filing here.
The company also said in its statement it “expects operating cashflows to remain negative until June and it expects to incur additional hedging losses. “Given the uncertainty in the market, we have taken a pause and plan to monitor developments closely before entering into any additional hedges”, SIA said in the statement.
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The company said it is working to conserve cash as much as possible with pay cuts to management and directors and has reached agreements with many employees that include agreements on no pay leave through several schemes, a hiring freeze, deferral of non-essential expenditure projects and imposition of tight controls on discretionary expenditures.
“We are in negotiations with aircraft manufacturers to adjust our delivery stream for existing aircraft orders, in view of prevailing market conditions, balancing that with our longer-term fleet renewal programme and we are talking with various suppliers to reschedule payments. The company also earlier announced it was raising S$15 billion (US$10.6 billion) through debt and equity sales.
The airline earlier said 10 out of 200 Singapore Airlines’ planes are currently making passenger flights with 95 percent of the fleet deployed for cargo-only services and others parked at Changi Airport and in Australia.
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