SIA still in the red but revenue up amid improving business conditions

Singapore Airlines saw its balance sheet gain strength during the quarter. ST PHOTO: LIM YAOHUI

SINGAPORE - Singapore Airlines remained in the red in the second quarter but saw a significant turnaround in revenue following the reopening of air travel and continuing demand for cargo amid a global supply chain crunch.

The airline group posted a net loss of $428 million for the three months to Sept 30, down 4.6 per cent from the first three months of the financial year.

But perhaps more importantly, revenue surged $237 million from the first quarter to $1.539 billion, a rise of 18.3 per cent.

Total expenditure grew almost 20 per cent quarter on quarter as the expansion in passenger operations led to 25 per cent rise in net fuel costs to $450 million, driven by higher fuel volume uplifted and fuel prices.

The strong pick-up in revenue came on the back of a 43.4 per cent quarter-on-quarter surge in passenger traffic, outpacing the 21.5 per cent expansion in capacity.

As a result, passenger load factor improved 2.6 percentage points compared with the previous quarter to 17.4 per cent.

The airline said the launch of Singapore's first quarantine-free vaccinated travel lane (VTL) arrangements with Brunei and Germany in early September resulted in an uptick in demand, especially to Germany. Around a dozen more VTL routes have since been added.

Cargo revenue hit new records, increasing 14 per cent, with yields remaining elevated and loads carried rising sharply as supply chain disruptions intensified.

The company also saw its balance sheet gain strength during the quarter.

Group shareholder equity rose by $6.1 billion from Mar 31 to $22 billion, while cash and bank balances advanced $4.7 billion to $12.5 billion, primarily due to the issuance of the Rights 2021 Mandatory Convertible Bonds.

Total debt balances increased by $0.7 billion to $15.1 billion, attributable to the increase in lease liabilities as a result of sale-and-leaseback activities. As a result, the debt-equity ratio fell from 0.9 times to 0.69 times.

In addition to the cash on hand, the group continues to retain access to $2.1 billion of committed lines of credit, all of which remain undrawn at present.

In total, SIA has raised $21.6 billion in fresh liquidity since April 1, last year.

In short, the airline is finally seeing the proverbial light at the end of the tunnel as VTLs start to boost demand.

Meanwhile, its transformation programme involving streamlining operations, trimming costs and right-sizing its fleet is also paying off.

"Air travel demand is expected to grow as vaccination rates rise, especially in countries within the Asia-Pacific region, and as government regulations ease further across key markets," the company said in a statement.

"The group remains ready to capitalise on revenue and growth opportunities as they arise, and will adjust its capacity accordingly, while ensuring operational resilience and cost discipline."

The airline will resume Airbus A380 operations to London from November 18, and Sydney from December 1 to support increased demand on these routes.

Flights to Houston via Manchester start on Dec 1 while a seasonal Singapore-Seattle-Vancouver service kicks off on Dec 2.

Meanwhile, the traditional year-end cargo peak period is expected to see strong demand, supported in part by retail inventory restocking before the peak shopping season. This comes amid an ongoing industry capacity crunch for both air freight and ocean freight.

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