SIA Engineering releases Q3 business update

Net profit was S$33.2 million for the quarter ended 31 December 2021, an increase of S$25.5 million year-on-year. Excluding government wage support and the one-time writeback of tax provisions, the group would have been in a loss position of S$7 million.

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https://magellangroup.net/engine-sales-leasing-aavWith international flight activities continuing to recover with progressive relaxation of border restrictions and establishment of bilateral travel arrangements, the number of flights handled at the group’s Singapore base was 65 percent higher year-on-year and 17 percent higher quarter-on-quarter. While this volume of flights handled is only at 31 percent of pre-pandemic volume, the continuing recovery trend is encouraging. With this recovery, demand for transit services and aircraft return-to-service work increased while demand for aircraft preservation work reduced as more aircraft return to service.

At Base Maintenance, more aircraft maintenance checks were performed during the quarter as compared to last year, but the work content of these checks was lighter as a higher proportion of the checks performed were for young new-generation aircraft. The Engine Services Division formed at the start of the financial year is making progress in growing its suite of engine-related capabilities. Its new facility to provide quick turn maintenance on CFM LEAP engines will start operations towards the end of this financial year. During the quarter, longterm contracts were signed to provide CFM LEAP engine testing services to Safran Aircraft Engines and expanded on-wing services for Rolls-Royce Trent engines. Preparations to strengthen these capabilities are in progress before the engine maintenance activities commence and will gradually pick up in the next financial year.

With higher flying activities, business volume at the company’s joint venture (JV) companies is also gradually recovering. Total engine inductions and shipments at our engine JVs is about 25 percent below the pre-pandemic levels. SIA Engineering continues to make good progress in its Phase 2 Transformation programme with pervasive implementation of Lean methodology, digital solutions and technology-enabled services across operational and business support processes. These are improving work efficiency, enhancing our staff experience and in turn delivering productivity gains and boosting our service delivery to our customers. While productivity gains have been registered, we expect to reap further benefits from such implemented initiatives as business volume picks up.

OUTLOOK
The group’s revenue recovery remains uncertain even with progressive opening of Vaccinated Travel Lanes (VTLs) as the recent spikes in COVID-19 cases caused by the more contagious Omicron variant has disrupted international air travels which have been gradually building up. Performance outlook depends on the extent of revenue recovery outpacing costs and the tapering of government wage support. To strengthen the company’s MRO eco-system and sustainable growth beyond the pandemic, the company said it is focused on initiatives to strengthen its core competency through transformation and have been actively pursuing business expansion through capabilities building and extending its geographical reach. The recently announced acquisition of a 75 percent stake in SR Technics Malaysia is a strong addition to its newly formed Component Services Division and broadens our range of component repair capabilities.

The company said it has successfully tested the use of sustainable aviation fuel (SAF) to perform engine tests. The trial paves the way for more engine tests to be performed using SAF when the adoption of SAF scales up in the future. In addition, the company’s wholly-owned subsidiary, SIA Engineering (Philippines) Corporation, also recently signed an agreement to collaborate with an aircraft part-out specialist to provide sustainable, end-to-end aircraft recycling solutions.

FINANCIAL PERFORMANCE
The Group revenue for the third quarter of FY2021-22 increased 33.8 percent year-on-year to S$140.0 million. The increase was largely driven by increase in transit handling-related revenue due to the higher number of flights handled. Expenditure increased at a higher rate of 42.8 percent to S$147.8 million, mainly due to reduction in government wage support. Excluding the impact of government wage support, expenditure increased 12.4 percent.

Share of profits of associated and joint venture companies was S$40.1 million, an increase of S$27.8 million (+226 percent) year-on-year with higher contributions from the engine and component segment (+S$22.4 million), and lower losses from the airframe and line maintenance segment (+S$5.4 million). The increase for the engine and component segment was mainly due to a one-time writeback of tax provisions by certain associated companies. The increase for the airframe and line maintenance segment was mainly due to increase in flight activities.

Net profit was S$33.2 million for the quarter ended 31 December 2021, an increase of S$25.5 million year-on-year. Excluding government wage support and the one-time writeback of tax provisions, the group would have been in a loss position of S$7 million.

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