Singapore Airlines (SIA) expects to make a full-year net loss for the first time in its 48-year history, as the coronavirus pandemic continues to hammer the global aviation sector.
The SIA Group, which includes national carrier SIA, regional arm SilkAir and budget carrier Scoot, said in a Singapore Exchange update yesterday that it is making the forecast despite "strong results" in the first nine months of the financial year that ended in March.
A small operating profit is still expected for the full year, it 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 slowing.
The full results for the year will be announced on May 14.
Adding to the gloom on the back of capacity cuts that will last until end-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 reduced flights have led to an excess in fuel bought, and with fuel prices continuing to be weak, SIA foresees the likelihood of more fuel hedging losses.
The fall in 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 flying, and just 2 per cent of Scoot planes are expected to take to the skies in the next two months.
The group 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."
An internal task force has also been set up to review all aspects of its operations to better prepare for the post-Covid-19 climate, when air travel will begin to recover.
It has taken steps to manage costs and conserve cash, including its management taking pay cuts of up to 30 per cent and its directors volunteering a 30 per cent cut in fees.
It has also reached an agreement with its unions on varying 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 makers to defer orders.
In its update, the SIA Group clarified that it has no financial obligations to Virgin Australia, which it partly owns. Last month, Virgin Australia became Asia's first airline and the first long-haul carrier to fall amid the pandemic, following the collapse of British regional airline Flybe.
SIA Group said it has no outstanding loans to the airline and has no exposure to further losses it incurs.
The World Tourism Organisation predicts international arrivals to decline between 58 per cent and 80 per cent this year.
