Singapore Airlines posts S$4.27 billion net loss

Passenger traffic down 97.9% due to global restrictions on international travel but strong cargo revenues cushioned plunge in passenger contributions

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APAS Aircraft Storage Alice Springs
Airlines like Singapore Airlines are bringing planes out of storage as traffic improves with the removal of some COVID restrictions. (PHOTO: Steve Strike/Outback Photographics)

https://www.bigmarker.com/series/ebace-connect/series_summit?utm_bmcr_source=MediaFlag carrier Singapore Airlines (SIA) said on Wednesday (19 May) that it posted a net loss of S$4.27 billion (US$3.19 billion) for the financial year ended March 2021 due to the COVID-19 pandemic and its effects on international aviation.

The airline said group passenger traffic (measured in revenue passenger-kilometres) shrank 97.9 percent in the financial year ended 31 March 2021 from a year before and that group revenue fell by S$12 billion or 76.1 percent year-on-year to S$3.816 billion due to the plunge in passenger flown revenue across Singapore Airlines, SilkAir and Scoot – the three passenger airlines within the group. This was partially offset by higher cargo flown revenue, which rose by S$758 million or 38.8 percent year-on-year to S$2.709 billion. Improvements in freighter utilisation, deployment of passenger aircraft for cargo-only flights, and removing seats from passenger cabins to create additional volume for cargo partially mitigated the loss of passenger aircraft bellyhold capacity during the pandemic. Strong air cargo demand, especially in key segments such as e-commerce, pharmaceuticals and electronics, provided strong support for both cargo load factors and yields amid tight industry cargo capacity.

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

The company also announced it plans to raise at least S$6.2 billion in convertible bonds to help it weather the continuing downturn in aviation. The issuance will allow the SIA Group to maintain a strong equity base and provide it with additional options moving forward to raise further debt financing as necessary. It further strengthens the group’s financial foundation to navigate the crisis, SIA said.

Singapore Airlines Chairman Peter Seah said: “Since 1 April 2020, we have raised S$15.4 billion in fresh liquidity that has given us a strong foundation as we navigated the challenges posed by the COVID-19 pandemic with the support of our stakeholders. However, this crisis is not over. While the growing pace of vaccinations has given us hope, new waves of infections around the world mean that restrictions on international travel largely remain in place. The SIA group has grown its passenger capacity and resumed selected services in a safe and calibrated manner, but industry bodies forecast that air traffic is not expected to recover to pre-COVID-19 levels until 2024.”

SIA said its group fleet currently consists of 162 passenger aircraft and seven freighters. This excludes 414 aircraft which are deemed surplus to the group’s requirements, six Boeing 737 MAX 8s that have been temporarily withdrawn from service, and two aircraft (one Airbus A330 and one Airbus A320) that left the operating fleet in preparation for lease returns.

Listen to the SIA Analysts Conference Call Here.

During the fourth quarter, the group continued to expand its network in a calibrated manner by resuming services to some destinations, and adding frequencies to some existing points. The transfer of narrow-body services from SilkAir to SIA began on 4 March, starting from Phuket. As of 31 March 2021, SIA served 47 destinations including Singapore, up from 38 at the end of December 2020. SilkAir served five destinations, down from eight, while Scoot’s network increased by one to 18 destinations. By the end of the financial year, the Group’s passenger network covered 60 destinations including Singapore, compared to 54 three months earlier. The group’s cargo network comprised 72 destinations including Singapore, up from 66 as of 31 December 2020.

The airline group said it expects passenger capacity to be around 28 percent of pre-COVID levels by June 2021. By July 2021, group capacity is expected to reach around 32 percent of pre-COVID levels, and it expects to serve around 49 percent of the points that were flown before the crisis. “Even though mass vaccination exercises are in progress in most of our major markets, the prognosis for the global airline industry remains uncertain. While domestic markets have recovered in some countries, international air travel remains severely constrained and its recovery trajectory is still unclear,” SIA said.

Outlook

Because Singapore Airlines has no domestic network, its Changi Airport base is still almost a ghost town in 2021. A lone student waits to say goodbye to a friend in a nearly deserted departure hall. (PHOTO: Matt Driskill)

Despite the resurgence of COVID-19 infections in many parts of the world, the growing pace of mass vaccination exercises in key markets provides hope for further recovery in international air travel demand in the second half of 2021, SIA said in its earnings announcement. “Singapore Airlines strongly supports all efforts to further open borders in a safe and calibrated manner. The group expects to continue with a measured expansion of the passenger network, and will remain nimble and flexible in adjusting capacity to meet the demand for air travel. Strong fundamentals continue to drive air cargo demand, with healthy Purchasing Managers’ Index readings across many key export economies. Demand from the e-commerce and pharmaceutical segments, among others, remains robust. SIA is well positioned to capture more COVID-19 vaccine shipments into the Asia-Pacific region as vaccine production ramps up and exports grow.”

New board director

Singapore Airlines also announced that Jeanette Wong will join its board as an independent non-executive director in June. Wong is a former DBS Bank group executive where she was responsible for the Institutional Banking Group, which encompassed Corporate Banking, Global Transaction Services, Strategic Advisory as well as Mergers and Acquisitions.

Wong was a director of DBS Bank (China) Limited and Chairperson of DBS Bank (Taiwan) Ltd, and was the Chief Financial Officer of DBS Group between 2003 to 2008. Before joining DBS Bank, Wong was at JP Morgan for 16 years where she held regional responsibilities for the Global Markets and Emerging Markets Sales and Trading business in Asia. She was also JP Morgan’s head for Singapore between 1997 to 2002. Wong began her career in 1982 at Banque Paribas, followed by Citibank from 1984 to 1986, before joining JP Morgan in 1986. Wong currently sits on the Boards of UBS Group AG and UBS AG, Prudential, PSA International Pte Ltd and Jurong Town Corporation. She is a member of the Securities Industry Council and a member of the Board of Trustees at National University of Singapore. She is also the Chair of NUS Business School Management Advisory Board and a member of the Global Advisory Board, Asia, for the University of Chicago Booth School of Business.

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