SINGAPORE - Geopolitical tensions, elevated fuel prices and softer economic conditions did little to prevent Singapore Airlines (SIA) from posting record first-half earnings.

Boosted by strong travel demand, the carrier group booked a record $1.44 billion net profit for the half year to end-September, up 55 per cent from $927 million for the same six months a year ago. Operating profit came in at a record $1.55 billion, a 26 per cent jump.

Revenue was up 9 per cent to $9.16 billion.

The company declared an interim dividend of 10 cents, amounting to $297 million in total payout.

As at Sept 30, the group shareholders’ equity stood at $17.3 billion, a decline of $2.5 billion from March 31. This comes after half of the $3.4 billion of mandatory convertible bonds (MCBs) that were issued in June 2021 were redeemed in June 2023. The redemption saw SIA’s cash balance decrease by $2.8 billion to $13.5 billion.

The latest half-year results were underscored by strong operating numbers.

SIA and its low-cost unit Scoot carried 17.4 million passengers in the April-September 2023 period, up 52.3 per cent year on year. 

Passenger traffic rose 38 per cent from a year before, outpacing the capacity expansion of 29 per cent, and boosting the group passenger load factor (PLF) – which essentially measures the percentage of seats occupied fleet-wide – by some 5.8 percentage points to a record half-yearly figure of 88.8 per cent.

The only discernible “soft” area for SIA was cargo. Its cargo load factor fell 8.4 percentage points to 52.7 per cent year on year as cargo loads dipped 6 per cent against capacity growth of 8.9 per cent. That said, the cargo performance was still stronger than the years immediately prior to the pandemic.

SIA expects the demand for air travel to remain healthy through the first quarter of 2024, prompting the group to rapidly expand its network services. 

During the July-September quarter, SIA reinstated services to Busan, South Korea; and Scoot resumed flights to Jinan, Nanchang and Shenzhen in China. Besides taking over the Shenzhen route from Scoot this month, SIA is ramping up flight frequencies to Guangzhou. Meanwhile, Scoot will resume operations to Chinese cities Kunming and Changsha from November 2023.

With these, SIA and Scoot will serve 23 destinations in China, compared with 25 in the pre-pandemic period.

Services are also being ramped up to Hong Kong, Melbourne, Sydney, Frankfurt, Cairns, Male and Barcelona. SIA will also launch four weekly direct flights between Singapore and Brussels in April 2024.

Flight frequencies are expected to exceed pre-pandemic levels for multiple destinations, including Ahmedabad (India); Beijing and Shanghai (China); Copenhagen (Denmark); Da Nang (Vietnam); Darwin, Melbourne and Perth (Australia); Dubai (United Arab Emirates); Tokyo-Haneda (Japan); and Seattle and Houston (United States).

In fact, the outlook is so positive that the group expects to reinstate capacity to 92 per cent of pre-pandemic levels by the end of next month, and hit pre-Covid-19 capacity by late next year.

But it cautioned that significant industry-wide capacity restoration, especially in the Asia-Pacific region, could put pressure on passenger yields. The demand for air freight is expected to remain soft in the traditional peak third quarter of FY2023-24, dampened by excess inventories, geopolitical tensions and macroeconomic headwinds.

High fuel prices due to supply risks in the oil market and inflationary pressures on non-fuel costs are also key concerns.

The price of jet kerosene has risen some 20 per cent over the past six months to around US$118 per barrel now. Despite this, the group’s net fuel cost fell 15 per cent year-on-year to $2.28 billion.

Meanwhile, the company is continuing to pay down borrowings accumulated during the pandemic years.

On Tuesday, SIA said it intends to redeem 50 per cent of the remaining MCBs that were issued in June 2021. The redemption will be carried out on a pro-rata basis, with the redemption amount to be paid to eligible bondholders on Dec 26. Upon completion, the group would have redeemed 75 per cent of the June 2021 MCBs in total.

Last month, the company redeemed all of the $600 million five-year fixed-rate notes upon its maturity.

Elsewhere, SIA is pursuing its multi-hub strategy via a stake in the privatised Air India group, which is being merged with Vistara. The merger will result in SIA owning about 25 per cent of the Tata group-controlled Air India.