SINGAPORE - Singapore Airlines (SIA) expects to make a full-year net loss for the first time in its history as the coronavirus continues to hammer the global aviation sector.
The SIA Group, which comprises national carrier SIA, regional arm SilkAir and budget carrier Scoot, said in a Singapore Exchange update on Friday (May 8) that the forecast is despite "strong results" in the first nine months of the financial year that ended in March 2020.
A small operating profit is still expected for the full year, the airline added.
Operating cash flows are expected to remain negative in the April to June quarter, with the Covid-19 pandemic not showing any definitive signs of abatement.
The full results for the year will be announced on May 14.
Making the announcement on the back of capacity cuts that will last until the end of June, the SIA Group said its financial situation has been worsened by the collapse of fuel prices in March, which led to fuel hedging losses.
Hedging is a risk assessment tool that allows airlines, for example, to fix fuel prices in advance to minimise the effects of volatility on their operations. The reduction in flights has further led to an excess in fuel bought, and with fuel prices continuing to be weak, SIA said more fuel hedging losses will likely be incurred going forward.
The nosedive in the demand for air travel has forced many carriers, including SIA, to ground most of their fleet.
Only 4 per cent of SIA and SilkAir planes are still flying, and just 2 per cent of Scoot planes are expected to take to the skies in the next two months.
The airline said: "The timing of any recovery from the Covid-19 crisis and its trajectory remain uncertain. During this time, the SIA Group continues to pursue steps to reduce costs and conserve cash, and proactively build liquidity and strengthen our balance sheet."
The group has also set up an internal task force to review all aspects of its operations during this time to better prepare for the post-Covid-19 climate, when air travel begins to recover.
It has progressively announced steps it has taken to manage costs and conserve cash, including pay cuts of up to 30 per cent taken by the entire management team and directors volunteering a 30 per cent cut in fees.
It has also reached an agreement with its unions on varying the days of compulsory no-pay leave every month for its pilots, executives and associations, as well as furlough for staff on re-employment contracts. This affects about 10,000 staff.
Other ways it has sought to stem losses include deferring non-essential projects and negotiating with aircraft manufacturers to put off aircraft orders.
In its Friday update, the SIA Group clarified that it has no financial obligations to Virgin Australia, which it partly owns. In April, Virgin Australia became Asia’s first airlines and the first long-haul carrier to fall amid the coronavirus outbreak, following the collapse of British regional airline Flybe.
The group said it has no outstanding loans to the airline and has no exposure to further losses incurred by the company.
The International Air Transport Association has said that the spread of the coronavirus will likely result in the first fall in global air travel in over a decade, which will make it the first such decline since the global financial crisis in 2008 to 2009.