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Singapore Airlines says COVID-19 recovery will take longer than expected
July 17th 2020
Singapore Airlines (SIA) said this week the recovery from the coronavirus pandemic would take longer than expected as a result of continued border restrictions that have crippled air traffic demand. Read More »
There has been some relaxation of travel restrictions in the airline group’s home market with Changi Airport able to transit passengers, albeit on selected routes. Singapore and China also have introduced a "green lane" for approved individuals to travel between Singapore and a handful of cities in China. But the lifting of border controls and travel restrictions had been "slower than earlier expected", a company statement said.
"Our current view is the recovery trajectory will be slower than initially projected and will have a material impact on our revenue generation capability in fiscal year 2020-2021," SIA said in a trading update lodged with the Singapore stock exchange (SGX) this week.
SIA group carriers flew 17,700 passengers in June. The numbers represented a 99.5% reduction from 3.2 million 12 months earlier but the figure was an improvement from 9,600 passengers in May.
There was also month-on-month growth in load factor (up 3.6 percentage points to 12.2%) and capacity, measured by available seat kilometres (ASK), which rose 30%.
"In June 2020, the demand for air travel continued to be severely impacted as border controls and travel restrictions remained in place around the world," SIA said.
Singapore Airlines flew to 24 destinations in June. Its subsidiaries, SilkAir and Scoot, served three and five routes, respectively.
In July, the group’s carriers are operating about 6% of originally scheduled capacity. SIA said recently this would increase to 7% in August. However, the outlook did not suggest any significant change in capacity in the short term.
"The SIA Group also has continued to review its capacity planning parameters given the evolving COVID-19 situation," SIA said.
SIA intends to issue a business update for the first quarter of its fiscal year on July 29. Ahead of that announcement, the company flagged a "material operating loss" for the quarter, which covers the three months to June 30. The company posted an S$803 million (US$577 million) operating loss for the three months to March 30.
In addition to the operating environment, SIA said the reduction in flying would lead to more fuel hedging losses in the financial accounts.
The company, which recently raised S$8.8 billion (US$6.3 billion)in a rights issue and secured S$1.4 billion in new loans, said it was actively pursuing cost management measures and options to preserve cash. It had the capability of raising more cash, it said.
A task force has been established to review all aspects of its operations, products and services to ensure they would be suitable for a post-coronavirus industry. "The SIA Group will remain nimble and be ready to scale up capacity to match demand as international routes re-open and travel sentiments improve," SIA said.
Figures from the International Air Transport Association (IATA) published recently showed global passenger numbers were expected to fall 50.6% to 2.24 billion in calendar 2020, from 4.54 billion in 2019. IATA estimated passenger numbers were not expected to return to pre-pandemic levels until 2022. IATA said recently passenger demand, or RPKs, was expected to fall 50% in Singapore in 2020, which represented a revenue impact of US$6.95 billion.
The group said its cargo operations posted a load factor of 82.5% in June, up 25.1 percentage points from 57.4% in the prior corresponding period. The cargo load factor was up across all of SIA's five geographic regions. Capacity or available freight tonne kilometres (AFTK), fell 61.2%, while cargo traffic or FTK, rose 44.1%.
The capacity contraction would have been much greater if not for the use of passenger aircraft on cargo-only flights, the airline group said.
Written by Jordan Chong
