Singapore Airlines Group posts quarterly profit

Singapore Airlines A350
(PHOTO: Shutterstock) Singapore Airlines (SIA) Group said on Thursday (24 February) that it posted a quarterly profit for the first time since the onset of the COVID-19 pandemic, recording a third quarter net profit of S$85 million (US$62.8 million). This came amid a significant step-up in air travel to and through Singapore in the October-December 2021 period, as well as continued robust demand and strong yields in the cargo market, the group said.

Airlines like Singapore Airlines have had to ground thousands of planes due to the COVID-19 pandemic and near shutdown of international aviation. (PHOTO: Steve Strike/Outback Photographics)

Singapore’s launch of Vaccinated Travel Lane (VTL) arrangements and its subsequent expansion, as well as the group’s response that resulted in it being the first to open sales on almost all available routes, helped unlock pent-up demand during the year-end travel season. The group carried 1.1 million passengers during the quarter, more than five times the number from a year before and double that of the second quarter of FY2021/22. Passenger capacity (measured in available seat-kilometres) grew 183.8 percent year-on-year, as the Group ramped up flights in response to the VTLs. By the end of the quarter, group passenger capacity reached 45 percent of pre-COVID-19 levels.

SIA, like other carriers, has seen its cargo business grow, but bellyhold cargo is troubled because of the cut in passenger flights. (PHOTO: Singapore government)

Improvements in passenger and cargo revenue resulted in the group revenue rising S$1.249 billion (+117.1 percent) year-on-year to S$2. 316 billion. Passenger flown revenue increased by S$650 million (+355.2 percent) to S$833 million, on the back of a 556.8 percent growth in traffic (revenue-passenger kilometres) that outpaced capacity expansion, resulting in the passenger load factor rising 18.9 percentage points to 33.2 percent. Cargo flown revenue rose by S$607 million (+81.6 percent) to S$1.351 billion, surpassing the S$1 billion mark for the first time and setting yet another new quarterly record. Robust demand during the traditional cargo peak period was buoyed by retail inventory restocking and strong e-commerce traffic. Cargo yields rose significantly (+26.9 percent) amid an ongoing industry capacity crunch.

The expansion of operations resulted in group expenditure growing S$842 million (+60.2 percent) year-on-year to S$2.240 billion. This increase consisted of a S$359 million increase (+131 percent) in net fuel costs, a S$331 million increase (+26 percent) in non-fuel expenditure, and S$152 million from the year-on-year impact of the fuel hedging ineffectiveness recorded last year and fair value changes on fuel derivatives. Net fuel cost rose to S$633 million, mainly on higher fuel prices (+S$330 million) and an increase in volume uplifted (+S$173 million), which was partially offset by a swing from a fuel hedging loss to a gain (-S$144 million). The increase in non-fuel expenditure by 26 percent was well within the 183.8 percent increase in passenger capacity and the 49.2 percent increase in cargo capacity. As a result, the group recorded an operating profit of S$76 million for the three months ended December 2021, versus a S$331 million loss from a year before (+S$407 million).

Singapore Airlines hopes the government’s Vaccinated Travel Lanes will bring people back to flying. A lone student waits to say goodbye to a friend in a nearly deserted departure hall. (PHOTO: Matt Driskill)

During the quarter, the strong demand for VTL services enabled the reactivation of A380 operations to London and Sydney. SIA took delivery of one Airbus A350 and four Boeing 737-8 aircraft, while Scoot took delivery of two A321neo aircraft. These aircraft will progressively join the operating fleet starting from January 2022. As of 31 December 2021, SIA’s operating fleet comprised 121 passenger aircraft and seven freighters while Scoot had 50 passenger aircraft in its operating fleet.

During the quarter, with the continued expansion of its network, the group saw a significant increase in the number of destinations that it served. This was led by the restoration of services to 12 cities in India, including VTL services from Chennai, Delhi, and Mumbai, as well as the resumption of flights to several points in Southeast Asia. SIA also launched services on the Singapore-Vancouver-Seattle route, and resumed flights to Houston (via Manchester). Scoot launched operations to Gatwick (via Bangkok) and Davao, and resumed services to Jeddah.

Based on current published schedules, the group expects passenger capacity to reach 51 percent by March 2022. This should result in an average capacity of 47 percent for the fourth quarter of FY2021/22, compared to pre-COVID levels. The group expects to serve over 70 percent of its total pre-COVID destinations by the end of the financial year.

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