SINGAPORE — Singapore Airlines (SIA) expects to incur an overall net loss for the financial year 2019 and 2020 — the first full-year loss ever in the airline’s 48-year history — as the Covid-19 pandemic continues to decimate demand for global air travel.
In a filing to the Singapore Exchange today, the national carrier said the full-year loss is expected despite strong results for the first nine months of the financial year.
The airline reported an overall net profit of S$520 million for the three quarters from April to December.
SIA’s financial year for 2019 and 2020 began in April last year and will end March this year.
SIA said that it expects to report a material operating loss for the final quarter, which means the losses in the final quarter alone due to Covid-19 would negate the S$520 million profit made over the first nine months.
More details will be provided on May 14 when the unaudited financial results for the fourth quarter and the full year will be released.
During the Severe acute respiratory syndrome (Sars) outbreak in 2003, which took place between March and July, SIA reported a loss of S$312 million in the first quarter of that financial year.
But it quickly recovered and posted a S$849 million net profit for the full financial year of 2003 and 2004.
As the Covid-19 pandemic has not abated in any significant manner at this point, SIA also announced that it will extend its capacity cuts till the end of June.
It announced on March 22 that it will cut 96 per cent of its SIA and SilkAir fleets originally scheduled up to the end of April as border controls tighten worldwide as a response to the pandemic.
Its budget carrier Scoot is expected to extend its capacity cuts by about 98 per cent until the end of June as well.
Another factor for SIA’s losses would be due to the fuel hedging losses on contracts that ended in the final quarter of this year. Hedging is a process of locking in prices for the longer term to guard against rises.
But with the collapse in oil prices globally, this means that SIA is paying for fuel at a higher price than what it is selling for on the market currently.
The capacity cuts also mean that SIA is in an over-hedged position with respect to fuel consumption for the new financial year of 2020 and 2021, the airline said.
As oil prices have continued to remain weak since the start of its new financial year, SIA said more fuel hedging losses may be expected in this ongoing quarter.
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It also expects operating cash flows to remain negative.
“Given the uncertainty in the market, we have taken a pause and plan to monitor developments closely before entering into any additional hedges,” said Brenton Wu, SIA’s Secretary in a filing to the exchange.
SIA also said it will continue to cut costs. It earlier announced that the airline’s entire management team will take pay cuts of up to 30 per cent. Its directors have also volunteered to take a 30 per cent cut in fees and staff are also placed on no-pay leave for a certain number of days in a month.
Other cost-cutting measures it has taken include implementing a hiring freeze, deferring non-essential expenditure projects as well as imposing tight controls on expenditure.
“We are in negotiations with aircraft manufacturers to adjust our delivery stream for existing aircraft orders, in view of prevailing market conditions, balancing that with our longer term fleet renewal programme and we are talking with various suppliers to reschedule payments,” said Wu.
The carrier also announced on March 27 that it will try to raise additional funds of S$15 billion by issuing new shares to its existing shareholders, with its major shareholder and state investment firm Temasek Holdings backing its plans.
With passenger travel obliterated, SIA said it will focus its efforts on its cargo businesses, as a reduction in capacity has resulted in strong demand for freight services.
“We have accordingly focused our efforts on maximising freighter utilisation, and continuing to supplement freighter capacity with the deployment of passenger aircraft operating cargo-only flights to meet the demand from global supply chains,” said Wu.
Although cargo capacity remains below levels seen before Covid-19, SIA said cargo yields have gone up in the final quarter of the financial year of 2019 and 2020, and is expected to sustain in this current quarter of the new financial year. — TODAY
