Singapore Airlines posts highest net profit in its 76-year history

Singapore Airlines A350
(PHOTO: Shutterstock)

Singapore Airlines (SIA) announced that its net income for the group, which includes budget arm Scoot, totalled S$2.16 billion ($1.62 billion) as the world reopened from COVID. It posted a loss of S$962 million the previous year. Revenue was S$17.78 billion, up from S$7.6 billion.

At the onset of the COVID-19 pandemic in 2020, the group said it acted swiftly and decisively to shore up liquidity and build its financial resilience. This strong liquidity position, and the confidence it engendered, enabled the group to take a long-term view and make several strategic decisions ahead of the recovery in global air travel.

Group passenger capacity reached 79% of pre-Covid1 levels in March 2023, higher than the 58% level for international scheduled services of Asia-Pacific airlines. SIA and Scoot collectively carried 26.5 million passengers, up six-times from a year before. The passenger load factor (PLF) jumped 55.3 percentage points to 85.4%, the highest in the Group’s history. SIA achieved a record PLF of 85.8%, while Scoot delivered a PLF of 83.9%.

The cargo segment’s performance moderated year-on-year as the demand for air freight declined, and as supply chain disruptions brought about by the COVID-19 pandemic subsided. Macroeconomic headwinds dampened consumer demand, while high inventory levels led to a slowdown in new orders. Cargo yields fell year-on-year as industry bellyhold capacity increased with the progressive restoration of passenger flights. Nevertheless, cargo revenue remained 83% above the pre-COVID level recorded in calendar year 2019.

Group revenue increased by $10,160 million (+133.4%) year-on-year to a record $17,775 million. Passenger flown revenue rose $10,560 million (+376.3%) to $13,366 million as traffic grew 449.9%, outpacing the capacity expansion of 94.0%. Revenue per available seat-kilometre (RASK) was 10 cents, the highest yearly RASK in the group’s history. Cargo flown revenue fell $735 million (-16.9%) to $3,604 million as a result of lower cargo loads (-11.4%) and yields (-6.2%). Notwithstanding, this was the second-highest annual cargo revenue figure in the group’s history.

Expenditures grew by $6,858 million (+83.4%) year-on-year to $15,083 million. This comprised a $3,020 million increase (+138.0%) in net fuel costs, a $3,761 million increase (+61.5%) in non-fuel expenditure, and a $77 million increase from the year-on-year impact of the fair value changes on fuel derivatives. Net fuel cost rose to $5,209 million, mainly due to the 49.6% increase in fuel prices (+$1,942 million) and higher volumes uplifted (+$1,495 million), and this was partially offset by higher fuel hedging gains (-$530 million). The increase in non-fuel expenditure was well within the 94.0% increase in passenger capacity.

Group operating profit came in at a record $2,692 million, reversing the $610 million loss in FY2021/22. Operating profit for SIA was a record $2,601 million, an increase of $2,713 million from the previous financial year. Scoot achieved a record operating profit of $148 million, up $602 million from FY2021/22.

The group posted a record net profit of $2,157 million for the year, versus a $962 million net loss in the previous year (+$3,119 million). This was mainly driven by better operating performance (+$3,302 million) and lower net finance charges (+$338 million), and partially offset by a tax expense versus a tax credit last year (-$615 million).

The group posted a record second half operating profit of $1,458 million, an improvement of $224 million (+18.2%) from the first half, as the strong demand for air travel continued into the second half of the financial year. Revenues rose $941 million (+11.2%) compared to the previous six months to $9,358 million, the highest half-year revenue for the SIA Group. Passenger flown revenue increased $1,408 million (+23.5%) on the back of a 24.8% growth in traffic, outpacing the 18.5% expansion in capacity. PLF rose 4.4 percentage points to a record 87.4%. RASK was 10.2 cents, the highest half-year RASK in the Group’s history. Cargo flown revenue fell $594 million (-28.3%) due to a decline in loads (-5.2%) and yields (-24.3%).

Expenditures grew by $719 million (+10.0%) half-on-half to $7,901 million. This comprised a $900 million rise in non-fuel expenditure (+20.1%) that was partly offset by a $182 million decrease (-6.8%) in net fuel cost. Net fuel cost fell to $2,514 million, mainly due to a 17.2% drop in fuel prices (-$595 million). This was partly offset by higher volumes uplifted (+$343 million) and lower fuel hedging gain (+$85 million). The increase in non-fuel expenditure was in line with the increase in passenger and cargo capacity.

The group posted a second half net profit of $1,230 million, up $303 million (+32.7%) from the first half. This was mainly attributable to the better operating performance (+$224 million), net interest income in the second half versus net finance charges in the first half (+$203 million), and partially offset by a higher tax expense (-$172 million).

SIA took delivery of one Airbus A350-900 in March 2023, and one Boeing 787-10 in April 2023. These aircraft have since joined the operating fleet, alongside one 737-83 aircraft post the retrofit of its cabin.

As of 31 March 2023, the group had 195 aircraft in its operating fleet comprising 188 passenger aircraft and seven freighters. SIA’s operating fleet comprised 133 passenger aircraft and seven freighters, while Scoot had 55 passenger aircraft. With an average age of six years and nine months, the group fleet is one of the youngest and most fuel-efficient in the airline industry6. This allows it to pursue operating efficiencies and continue offering world-class products and services to its customers. This also supports the group’s decarbonisation goals, as operating a young fleet of new generation aircraft is the most effective and direct way for an airline to materially lower carbon emissions in the near term.

The group recently reached an agreement with Boeing to adjust its aircraft order book. This includes swapping three 787-9s for three 787-10s, and cancelling eight 737-8s. These adjustments are in line with the group’s long-term fleet renewal strategy, and support its projected operational requirements. Following these adjustments, the group currently has 100 aircraft in its order book.

The demand for air travel remains robust in the first quarter of FY2023/24, underpinned by the recovery in air travel in East Asia. Forward sales remain healthy across all cabin classes, led by a strong pick up in bookings to China, Japan, and South Korea. The group will monitor the demand for air travel, and adjust its capacity accordingly.

Near-term cargo demand is expected to remain soft as the industry navigates headwinds from the macroeconomic environment, and as inventory levels recalibrate to post-COVID conditions. Inflation and weak economic conditions will impact consumer demand and trade. Increased bellyhold capacity amid softer demand continues to exert downward pressure on cargo yields, particularly on key trade lanes.

Geopolitical and macroeconomic uncertainties, as well as high cost inflation, could pose challenges for the airline industry in the months ahead. Even though fuel prices have moderated in recent months, they remain at elevated levels. As competition is expected to increase with more capacity being injected on international routes, the group will monitor developments closely, and be agile and nimble in its response.

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