Singapore Airlines reports historic annual net loss

Aviation Updates Philippines – Singapore-based carrier Singapore Airlines (SIA) reported an annual net loss - the first in its 48-year history - driven mainly by poor fuel hedging bets and a drop in passenger demand amid the COVID-19 pandemic.

In a filing to the Singapore Exchange on May 14 (Thursday), the SIA Group - which includes subsidiaries Silk Air and Scoot - reported a S$212 million net loss in the financial year ending March 31, compared to the S$683 million profit it reported during the same period last year.

The group also reported that it lost S$732 million between January and March this year. During the same three-month period in 2019, it reported a S$203 million net profit.

Operating profit also fell by as much as 94.5% to S$59 million, down from S$1 billion in the previous year.

SIA had a strong performance in the preceding nine months of the fiscal year, mainly due to strong passenger numbers and various initiatives undertaken as part of a business transformation program. Concerns regarding the spread of COVID-19 and the implementation of stricter border control measures, however, caused a significant decline in passenger traffic in the fourth quarter. 

This led to a S$894 million plunge in revenue, down 22% from the previous year. This also pulled down group revenue for the year to S$16.98 billion, a 2.1% decrease compared to the same period last year. As a result, the group was forced to cut its operating capacity by 96% between the months of April and June this year.

Fuel prices also fell in the fourth quarter due to an oil price war between Russia and Saudi Arabia, leading to a supply glut and fuel hedging losses of up to S$198 million.

According to SIA, the deterioration of its performance between January and March 2020 "eroded the improvements made in the first nine months of the year."

The airline has put together an internal task force to review all aspects of its operations to ensure that it is ready to ramp up its services once the demand for air travel recovers. This would depend upon when border controls and travel restrictions ease.

"There is no visibility on the timing or trajectory of the recovery at this point, however, as there are few signs of an abatement in the COVID-19 pandemic," SIA said in a statement.

The group said that it expects its operating cash flow to remain negative in the quarter ending June 30 as most of its aircraft remains grounded. Additional fuel hedging losses are also possible.

SIA noted that it is currently exploring other sources of funding such as financing and sale-and-leaseback transactions. The group is also in negotiations with aircraft manufacturers to push back deliveries of new aircraft and are talking with various suppliers to defer payments.

In March, SIA announced cost-cutting measures to conserve cash, including pay cuts for its management team and compulsory no-pay leaves for its employees. 

Though passenger numbers are down, SIA says that the demand for essential goods such as medical supplies, pharmaceuticals, and fresh foods remains strong, and this will "sustain cargo revenues for the near term." 

It will also continue to pursue charter opportunities and will continue to monitor changes in demand.

Last April, Singaporean Prime Minister Lee Hsien Loong promised to help the carrier make it through this crisis.

"SIA has always flown Singapore's flag high all over the world and made us proud. We will spare no effort to enable it to do so again," he told the public during his May Day address.

The Singapore government has already set aside at least S$750 million to support the aviation sector. This is part of an overall assistance package worth over S$1 billion to help the aviation and tourism industries recover from the pandemic.

Photo by Reuters