UPDATED: Singapore Airlines posts S$1 billion loss in Q1 as COVID-19 blocks international travel

Singapore Airlines A350
(PHOTO: Shutterstock)

Singapore Airlines (SIA) announced Wednesday (29 July) that it lost S$1 billion (US$727 million) in the first quarter after the COVID-19 pandemic virtually shut down international aviation around the world. In a statement released after the close of trading, the company said its net loss hit S$1.12 billion and its passenger loads fell by an incredible 99.5 percent for the quarter. The company said earnings were also hit by the liquidation of its NokScoot affiliate that cost it S$127 million and which was mainly related to the non-cash impairment of seven Boeing 777 aircraft that had been leased to NokScoot.

Singapore Airlines had warned earlier in July that it anticipated a loss for the quarter and said then it was working to conserve cash like every other airline the world. The company said Wednesday its group-wide spending fell S$2.01 billion (-51.6 percent) from last year to $1.88 billion, which it attributed to lower net fuel costs and non-fuel expenditure. Net fuel cost fell S$1 billion (-86.8 percent), as capacity cuts and lower fuel prices led to a reduction in fuel cost before hedging of S$1.14 billion (-93.2 percent).

During the first quarter, Singapore Airlines said it scaled back operations due to border closures but retained services to key cities to operate repatriation flights. On the full-service front, SIA maintained a skeletal network to initially connect  Singapore with 14  key metros in the world, and subsequently increasing to 24 by the end of the quarter. Affiliate SilkAir temporarily ceased operations across the network except for flights to Chongqing and has taken the decision to indefinitely suspend operations to Koh Samui. By June, SilkAir added services to Kuala Lumpur and Medan as well. On the low-cost front, Scoot operated a minimal network with flights to Hong Kong and Perth, and subsequently reinstated flights to Guangzhou, lpoh, Penang and Kuching.

Empty check-in counters at Singapore’s Changi Airport. (PHOTO: Shutterstock)

The airline also said that starting in June Singapore and selected cities in China had set up a so-called “fast lane” arrangement that will ease some travel restrictions between the two. It said some transit restrictions have also been lifted and the airline is now able to carry one-way transfer traffic originating from Australia, New Zealand, China, Hong Kong, Taiwan, South Korea, Japan and Europe to any point within the SIA Group network. The group can also carry two-way transfer traffic between parts of the Pacific and Europe, and North Asia, and between North Asia and Europe within SIA Group network. With the partial resumption of transfers via Changi Airport, the group’s network has increased  from 18  destinations in April to 32 destinations including Singapore by the end of June.

SIA also said it continued to negotiate with plane manufacturers over “adjustments to the delivery stream of existing aircraft orders and the schedule of progress payments to reduce near-term cash outflows”. It said it has reached agreement with Airbus on some orders and discussions with Boeing are ongoing. The airline also said a group fleet of 220 aircraft including seven freighters are deployed on passenger services. All seven freighters are operational while 33 passenger aircraft have also been deployed on cargo-only services. The group has parked 119 aircraft at Singapore Changi Airport and 29 aircraft are stored in Alice Springs, Australia.

Airlines like Singapore Air have had to ground thousands of planes. (PHOTO: Steve Strike/Outback Photographics)

Singapore Airlines said the “recovery trajectory in international air travel is slower than initially expected” as the International Air Transport Association (IATA) said in a media call on Tuesday (28 July). IATA and other industry associations “have continued to revise downwards their projections for the recovery of global passenger traffic in the near term. Industry forecasts currently expect that it will take between two to four years for passenger traffic numbers to return to pre-pandemic levels”, Singapore Airlines said.

The company said for “planning purposes” it estimates that by the end of Fiscal Year 2020/2021, the group’s passenger capacity may reach less than half of its pre-COVID-19 levels. As the company continues to conserve cash, it is also reviewing its future fleet plans and said the review “is likely to lead to a material impairment of the carrying values of older generation aircraft, particularly the A380 aircraft which would account for approximately S$1 billion”.

The airline group also said global airfreight capacity is anticipated to remain constrained in the near term due to “significantly lower belly-hold cargo capacity worldwide, which may help to sustain the current cargo load factors. With the progressive reopening of economies and as manufacturing resumes, there is likely to be a gradual pickup in general cargo demand even as urgent movement of medical supplies recede. We will continue to optimise the usage of our freighters to capture demand opportunities and supplement our cargo capacity through the deployment of cargo-only passenger flights when justified”, SIA said.

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