Coronavirus pandemic

SIA plans 12% cut in capital spending this financial year

SIA reported its first-ever annual loss citing poor fuel hedging bets and the collapse in demand driven by the coronavirus pandemic.
SIA reported its first-ever annual loss citing poor fuel hedging bets and the collapse in demand driven by the coronavirus pandemic.ST PHOTO: DESMOND WEE

SYDNEY • Singapore Airlines (SIA) will cut capital spending this financial year by at least 12 per cent compared with its previous plan, with the final reduction to be determined by talks with planemakers over delivery delays, its chief financial officer said yesterday.

The new forecast of $5.3 billion or less by the end of the year ending March 31 next year compares with a $6 billion figure outlined last November before the coronavirus pandemic destroyed demand and led the airline to ground most of its fleet.

"Any agreements we may reach with Airbus and Boeing in the coming weeks and months are not reflected here," SIA chief financial officer Stephen Barnes said of the new estimate at a briefing for the media and analysts.

SIA on Thursday evening reported its first-ever annual loss, of $212 million, citing poor fuel hedging bets and the collapse in demand driven by the coronavirus pandemic, saying the timing of any recovery was uncertain.

Regional rivals Cathay Pacific Airways and Qantas Airways are among global carriers looking to push back the delivery of new aircraft as they grapple with the plunge in demand.

Mr Barnes said SIA does not expect to fly at its pre-pandemic capacity for at least 12 to 18 months. It plans to retire its Boeing 777-200ERs earlier than expected and will not renew its eight Airbus SE A330 leases, which will expire in the next 12 to 14 months, he said.

Mr Brendan Sobie, an independent analyst in Singapore, said it would be difficult for SIA to make significant changes to its current-year deliveries, but that as the planemakers slowed production, some could be pushed into next year.

"I expect a bigger impact in the following fiscal years, with more significant deferrals in terms of number of aircraft and number of years," Mr Sobie said. "This is in line with what we are seeing in the industry generally."

SIA and regional arm SilkAir have cut 96 per cent of passenger capacity until the end of next month, and low-cost arm Scoot has cut 98 per cent.

The company said its cargo capacity had suffered less, dropping 60 per cent, because it was maximising the use of its dedicated freighter fleet, using empty passenger jets to carry cargo and doing ad hoc charter flights.

Air freight rates have risen sharply as airlines have cut back on passenger capacity; in normal times, around 50 per cent of air cargo is carried in the belly of passenger planes.

REUTERS

A version of this article appeared in the print edition of The Straits Times on May 16, 2020, with the headline 'SIA plans 12% cut in capital spending this financial year'. Print Edition | Subscribe