International Business & Economy Singapore Airlines reports annual net loss of S$212m due to COVID-19

Singapore Airlines reports annual net loss of S$212m due to COVID-19

The colossal amount in losses is a first in the airlines 48 year history

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SINGAPORE—On Thursday (May 14), Singapore Airlines (SIA) announced that it suffered an annual net loss of S$212 million, a first in its 48 years of operation, after the COVID-19 pandemic brought air travel to a near-standstill. The Government has promised to “spare no effort” in assisting the national flag carrier through this crisis, while SIA has formed an internal task force to study operations and to prepare for when air travel recovers.

The fear of catching COVID-19 has caused global travel to stop in its tracks, as different countries all over the world have issued travel restrictions and even shuttered their borders to incoming travellers.

First annual net loss in 48 years

SIA Group reported a S$212 million annual net loss to the Singapore Exchange for the year ending on Mar 31, 2020. The loss, a first for the consistent, world-class airline in its 48-year history, was a complete turnaround from the previous year, which garnered SIA a S$683 million profit.

For January to March of this year, the airlines lost S$732 million, whereas it made a S$203 million net profit in the same period in 2019.

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SIA noted that the operating profit for the year came in at S$59 million, 94.5 per cent less than the previous year’s figure of S$1 billion.

Prior to COVID-19, SIA said had entered the fourth quarter following a stellar performance in its first three quarters. However, passenger traffic dropped greatly in the last three months, thanks to fears of catching the infectious virus. This resulted in a S$894 million decrease in revenue, 22 per cent lower than the same period last year.

SIA group’s carriers reported a 60.4 per cent decrease in passenger carriage in March of this year.

Group revenue for the year fell to S$16.98 billion, which is 2.1 per cent lower than the previous financial year. According to SIA, the board did not present a final dividend.

On May 8, the national flag carrier said that it would be reporting a material operating loss in the last three months,  which ended on Mar 31, due in part to the drop in fuel prices, which then led to major hedging losses.

SIA also said that operating cash flow will likely remain negative in the quarter ending on Jun 30, as the majority of its fleet is still grounded, and further fuel hedging losses are to be expected.

The cost of the COVID-19 outbreak

The International Air Transport Association (IATA) has projected that the pandemic could cost passenger airlines up to US$113 billion (S$162.7 billion) in lost revenue this year.

SIA, its regional carrier SilkAir, and budget arm Scoot have cut their capacity greatly to the end of June—96 per cent for SIA and SilkAir, and 98 per cent for Scoot.

SIA also announced that its annual passenger flown revenue for the year had decreased by 1.2 per cent from last year. While it achieved S$753 million in the first three quarters of the financial year, it lost S$906 million in the last quarter.

In terms of cargo flown revenue, the airlines experienced a drop of 12.1 per cent. This was due to bad performance between April and December 2019, as stresses rose over international trade and key economies experienced a slowing down in export manufacturing.

SIA, SilkAir and Scoot reported that operating profits dropped to S$294 million, S$112 million and S$198 million for the year, respectively.

In the last quarter of the financial year, SIA, SilkAir and Scoot posted net losses at S$583 million, S$100 million and S$125 million, respectively.

Meanwhile, SIA Engineering announced an operating profit of S$68 million for the entire year, an increase of 19.3 per cent from the year before.

Activities while grounded

With most of its fleet grounded, SIA cabin crew are providing assistance at hospitals as “safe distancing ambassadors” in public places such as trains, shopping malls and markets.

SIA is lending support in the fight against COVID-19, delivering essential medical supplies and deploying evacuation flights to bring Singaporeans home from other countries.

“The group will maintain a minimum flight connectivity within its network during this period, while ensuring the flexibility to scale up capacity if there is an uptick in demand.

“In the meantime, the demand for essential goods such as medical supplies, pharmaceuticals and fresh foods still exceeds air freight capacity on many key lanes due to the sharp reduction in bellyhold capacity. This is expected to sustain cargo revenues for the near term.

“We will also continue to pursue charter opportunities, while closely monitoring for changes in demand,” the airlines announced on Thursday.

The road to recovery 

Analysts are predicting a very slow recovery of Singapore’s aviation and tourism industries, noting positively that the market will eventually recover fully.

The Government has pledged its full support to the national flag carrier, with Prime Minister Lee Hsien Loong promising to “spare no effort” in helping SIA recover.

“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,” PM Lee said in his May Day address.

The Government has set aside S$750 million to assistant in the recovery of the aviation industry, while SIA itself obtained up to S$19 billion of funding.

It is also looking to existing investors for up to S$15 billion through share sales and convertible bonds to counteract the blows the business has received.

The airline’s largest investor, Temasek Holdings, which owns around 55 per cent of SIA Group, is underwriting the fundraising.

SIA has also secured a S$4 billion bridge loan facility with DBS Bank, in accordance with the  company’s near-term liquidity requirements.

“The prospects for a recovery in international air travel in the months ahead 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 noted.

/TISG

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