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JULY 2020

Week 31


Singapore Airlines Group anticipates a capacity collapse of more than 50%

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July 31st 2020

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After reporting a quarterly loss this week for its latest quarter, the Singapore Airlines (SIA) group has forecast passenger capacity would be at least 50% lower for its full fiscal year compared with pre-COVID-19 numbers. Read More »

The airline group - Singapore Airlines, SilkAir and Scoot - fell into the red in the three months to June 30 with a net loss of S$1.123 billion (US$816 million) compared with a net profit of S$111 million in the same months last year.

SIA managed to cut costs by 52%, to S$1.89 billion, but revenue fell by a larger 79%, to S$851 million, SIA said in a regulatory filing to the Singapore stock exchange. The flag carrier has been among the hardest hit by the coronavirus pandemic. Some airlines are ramping up operations as their domestic markets opened, but SIA, without any domestic market of its own, is operating a skeleton international schedule "to bring many of our customers home". The network has grown from 18 destinations in April to 32 by June 30.

SIA said it stood ready to add extra frequencies if demand picked up in coming months. Despite this, it said passenger capacity by the end of September was projected to be about 7% compared with pre-COVID-19 flight schedules.

Although most international borders remained closed to foreign arrivals, a "fast lane" arrangement has been established for travel from Singapore and a number of cities in China. Singapore and Malaysia also have set up a travel arrangement for eligible citizens and Changi Airport has opened for transit passengers on several routes.

Nonetheless, SIA said the recovery trajectory in international air travel had been "slower than initially expected".

"Our current view for planning purposes is that by the end of fiscal year 2020-2021, the group's passenger capacity may reach less than half of its pre-COVID-19 levels," SIA said.

"The group continues to pursue cost management measures and explore additional means to shore up liquidity as necessary."

The airline group carried 32,000 passengers in the three months to June 30, down 99.4% from 5.5 million in the prior corresponding period. Passenger load factor for the quarter was 10.6%, a 72.6 percentage point reduction from 83.2% a year earlier.

SIA said it was flying 32 of its fleet of 220 aircraft on passenger services, with 33 other passenger aircraft operating cargo-only flights alongside seven freighter aircraft. Some 119 aircraft are parked at Changi International Airport and another 29 stored at Alice Springs in Australia.

The airline group has been negotiating with Airbus and Boeing to change aircraft delivery dates and restructure payment deadlines to reduce cash outflows.

It had reached agreement with Airbus "on some of these matters" and discussions with Boeing were "ongoing", the group said. 

The company has outstanding orders for 43 A320 family aircraft, 19 A350 family aircraft, 31 737 MAXs, 20 777-9Xs and 34 787 family aircraft, according to the websites of Airbus and Boeing.

It was planning for how the aviation industry would look like as the COVID-19 outbreak subsided and opportunities emerged.

SIA has set up an internal task force to review all aspects of its operations to ensure the company was ready to expand its services when air travel recovers.

The review was expected to be completed half way through fiscal 2021.

"We are reviewing the potential shape and size of our network over the longer term given COVID-19 and its impact on our passenger traffic and revenue, which will provide better clarity on the fleet size and mix that the group will need," SIA said.

"This review is likely to lead to a material impairment of the carrying value of older generation aircraft, particularly the A380, which would account for approximately $1 billion."

The integration of the Singapore Airlines operation and SilkAir was on track, with the first 737-800 to be integrated into main airline by the fourth quarter of fiscal 2021.

Written by Jordan Chong

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