SIA earnings bounce back in Q3, partly due to VTLs

The airline racked up a net profit of $85 million for the third quarter on the back of revenue of $2.32 billion. ST PHOTO: JASON QUAH

SINGAPORE - Singapore Airlines (SIA) posted its best quarterly results since the pandemic began, thanks to stronger cargo and passenger performances, due in part to the introduction of vaccinated travel lanes (VTLs).

The airline racked up net profit of $85 million for the third quarter of financial year 2021/2022 on the back of a revenue of $2.32 billion. This compares with a loss of $142 million in the October to December period in 2020 on turnover of just $1.07 billion.

Despite strong numbers for the three months to Dec 31 - traditionally a peak travel time - the group remained in the red for the first nine months of the year to the tune of $752 million. Still, this is a huge turnaround from a loss of $3.61 billion during the same period in 2020 at the height of the pandemic.

Revenue for the nine months rose 90 per cent to $5.14 billion from $2.7 billion a year earlier.

The expansion of operations resulted in expenditure growing $842 million year on year to $2.24 billion in the third quarter of financial year 2021/2022.

Net fuel costs rose to $633 million, mainly on higher prices and an increase in volume, which was partially offset by a swing from a fuel hedging loss to a gain.

Group expenditure increased by $791 million year on year to $5.7 billion.

The SIA group carried 1.1 million people in the third quarter, including 646,000 who travelled in December last year alone.

The numbers were double that of the second quarter and more than five times the number from the third quarter in 2020.

But this is still a far cry from the pre-Covid-19 numbers when the SIA group - SIA, Silkair and Scoot - carried 5.89 million passengers during the period from October to December in 2019 (Silkair has now been absorbed into the SIA fleet).

It carried 2.04 million passengers in December 2019 alone.

Passenger capacity during the October-December 2021 quarter (measured in available seat-kilometres) leapt 183.8 per cent year on year as flights increased in response to the VTLs.

By December last year, group passenger capacity had reached 45 per cent of pre-Covid-19 levels as its VTL network covered 31 cities across key markets in Australia, Europe, India, North America, South East Asia and Korea.

The overall passenger network covered 85 destinations, up from 65 in the previous quarter.

SIA expects passenger capacity to reach 51 per cent by March, when it will serve over 70 per cent of its total pre-Covid-19 destinations.

It will add 14 more VTL destinations in the coming weeks, bringing total services to 49 cities in 25 countries.

"Singapore's VTL arrangements have been a game-changer for the SIA group, facilitating quarantine-free mass travel for the first time since the pandemic began," the company said.

"While demand should continue to recover, especially on VTL services, passenger traffic is likely to moderate in the fourth quarter after the end of the year-end holiday season."

SIA Cargo division continued to enjoy robust demand, buoyed by year-end retail inventory restocking and strong e-commerce traffic. Cargo yields rose significantly amid an ongoing industry capacity crunch.

The cargo network comprised 95 destinations, up from 78.

While welcoming the improved quarterly results, some analysts wondered that the recovery could be short-lived in the wake of the war in Ukraine.

"Notwithstanding the $85million gain, SIA faces the prospect of a prolonged period of recovery brought about by Covid-19, and now conflict in Europe, traditionally an important source of revenue," noted Mr Shukor Yusof of aviation consultancy Endau Analytics.

"Cargo continues to be crucial in the near to mid-term. However, rising jet fuel costs and demand destruction in the premium segment, which is SIA's cash cow, could weigh down yields."

SIA has raised $22.4 billion in additional liquidity since April 1, 2020, and also has access to more than $2.1 billion in committed lines of credit, which remain untapped.

Its operating fleet comprised 121 passenger aircraft and seven freighters as at Dec 31 last year, while Scoot had 50 aircraft in its fleet.

SIA has 111 aircraft on order, including 31 Boeing 777-9s, which will ultimately replace SIA's A380 and its ageing B777-300ER fleet.

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