Singapore Airlines (SIA) posted a larger second-quarter loss despite a gradual recovery in passenger traffic and strong performance from the cargo business, due to a higher operating expenditure. As a result, operating loss for the quarter ended 30 September came in at S$345 million, a 25.9 percent year-on-year increase as compared to the S$274 million loss for the same quarter in 2020.
Total group revenue grew 18.3 percent to S$ 1.53 billion, with the passenger and cargo segment revenues being the biggest contributors to the growth. SIA says passenger traffic outpaced the capacity expansion, while the strong cargo performance was attributed to ongoing supply chain disruptions driving air freight demand. Total expenditure grew 19.6 percent to S$ 1.88 billion, primarily driven by higher fuel cost, increased fuel volume uplifted, and costs associated with expanded operations.
Net loss, however, grew by a smaller 4.6 percent year-on-year to nearly S$ 428 million.
First-half losses shrinks on the back of higher revenue
Meanwhile, the carrier saw its first-half operating loss shrinking by almost 67% to S$ 619 million. Similar to its second quarter performance, SIA attributed the improvements to a better performance from the passenger and cargo segments.
Total group revenue for the April to September 2021 period jumped 73% year-on-year to S$ 2.83 billion, as group expenditure recorded a small 1.5 percent decline to S$ 3.45 billion. SIA explains the decline was primarily due to the absence of “fuel hedging ineffectiveness” that was recorded during the first-half of 2020.
SIA was also able to reduce its net loss by 76 percent to S$ 837 million, due to the improved operating performance and the lack of impairment costs associated with aircraft deemed as surplus to its fleet requirements.
Cash and cash equivalents as of 30 September 2021 amounted to S$ 12.5 billion, up from the S$ 7.06 billion figure it had on the same date in 2020. The increase in cash amount was from the issuance of S$ 6.2 billion in mandatory convertible bonds.
As of 30 September, SIA’s group fleet stood at 171 aircraft, comprising 121 aircraft operated by SIA and 50 aircraft operated by low-cost subsidiary Scoot. Six Boeing 737 Max 8s previously operated by SilkAir were transferred to SIA, as part of SilkAir’s merger with SIA.
Looking ahead, SIA sees the move by Singapore to introduce quarantine-free vaccinated travel lanes for travellers heading to the country since September 2021 as one that will support the “safe and gradual recovery” of Changi Airport as a major air hub. It also expects air travel demand in Asia-Pacific to grow in line with rising vaccination rates, and a further easing of government regulations in key markets.
“The Group remains ready to capitalise on revenue and growth opportunities as they arise, and will adjust its capacity accordingly, while ensuring operational resilience and cost discipline,” says SIA.
The carrier expects to see a strong cargo demand for the year-end, partially aided by retail inventory restocking before the peak shopping season amid a capacity crunch for both air freight and ocean freight. But it notes certain economies are facing production constraints due to pandemic controls, supply chain disruptions, and energy shortages. Any expansion of cargo capacity will be driven by the resumption of passenger flights, and the deployment of passenger aircraft for cargo-only flights.
SIA concludes: “The SIA Group remains steadfast in its commitment to emerge stronger from the pandemic, as it forges ahead in the second year of its three-year Transformation journey. We have pressed on with initiatives to drive digital leadership and deliver world class product and services, while prioritising a seamless customer journey with robust health and safety standards”.