SIA reports record H1 loss of $3.47 billion on aircraft impairments, retrenchment costs

Singapore Airlines said industry airfreight capacity is anticipated to remain constrained.
Singapore Airlines said industry airfreight capacity is anticipated to remain constrained.ST PHOTO: ALPHONSUS CHERN

SINGAPORE (THE BUSINESS TIMES) - Singapore Airlines' (SIA) net loss in the second quarter doubled that of the first quarter, leading to a record net loss of $3.47 billion for the six months to September.

The Q2 losses came on the back of an impairment charge for older aircraft, as well as the $42 million retrenchment cost.

The national carrier reported a loss of $1.1 billion for the first quarter to June. With H1 loss coming in at $3.47 billion, it means that it bled $2.3 billion - twice the loss in Q1 - in the second quarter.

The H1 net loss was a reversal from a $206 million profit for April to September last year, before it was blindsided by the Covid-19 pandemic.

Revenue was 80.4 per cent down at $1.63 billion for the first half of FY 2021, compared to $8.3 billion in the preceding year.

The hit from the pandemic has not only resulted in steep decline in revenue, but has also led the group to book an impairment of $1.33 billion on the carrying values of older generation aircraft, said the carrier in a media statement released on Friday (Nov 6) after trading hours.

Besides the impairment on aircraft, SIA has also fully written down the goodwill of $170 million that was recorded when it took control of Tiger Airways in October 2014.

Furthermore, the retrenchment exercise which cut 2,000 jobs cost the group $42 million, SIA disclosed for the first time since its announcement on the axe falling.

It has skipped an interim dividend "in view of the significant loss incurred and the need to conserve cash".

SIA said industry airfreight capacity is anticipated to remain constrained because of lower bellyhold capacity arising from fewer passenger flights. This is expected to keep cargo yields and load factors "high" in the coming months.

It expects to see a progressive recovery in general cargo demand, and continued strong demand from pharmaceuticals and perishables. Cargo demand is also expected to get a boost from the big e-commerce sale days and new product launches, SIA said.

Hence, it will continue to grow the group's capacity to meet demand and expand the cargo network by deploying passenger aircraft on dedicated cargo operations.

SIA shares closed one Singapore cent higher at $3.48 on Friday, before the financial results were released.