SIA's financials improve on the back of rising travel demand

A nascent recovery in air travel demand enabled Singapore Airlines to improve its bottom line for the second half of the last financial year.

Net loss for the October 2021 to March 2022 period fell to $125 million, from $837 million during the first half from April to September last year.

This came on the back of a 69.4 per cent surge in top-line revenue to $4.79 billion, from $2.83 billion during the first half.

But the airline climbed back into the black at an operating level during the second half, posting an operating profit of $10 million during the April to September 2021 period.

For the full financial year ending March 31 this year, the carrier posted a net loss of $962 million, a huge improvement from the $4.27 billion in red ink spilt during the previous year.

Revenue for the year doubled to $7.62 billion, up from $3.82 billion a year earlier.

Operating loss was trimmed to $610 million, from a loss of $2.51 billion during the previous Covid-19-stricken year.

SIA's balance sheet was relatively stable, with total equity at some $22.4 billion. This included $9.69 billion in mandatory convertible bonds (MCBs) and $4.67 billion in general reserves. Total cash and bank balances stood at $13.76 billion, while total debt was $15.69 billion.

The SIA Group has raised $22.4 billion in fresh liquidity since April 2020. This includes $15 billion from shareholders through rights shares and rights MCBs, as well as bond issuances, secured financing, and sale-and-leaseback transactions. The company also has an additional $2.1 billion available in untapped lines of credit.

The forward numbers look good, thanks to a pickup in air travel momentum.

Earlier this week, SIA announced that it and its low-cost airline Scoot had carried a total of 1.5 million passengers last month, up 62.7 per cent from March. This was a massive 1,216.9 per cent more compared with the passenger numbers from the same period a year earlier.

The passenger load factor for last month stood at 72.7 per cent, the highest since the onset of the pandemic.

Total passenger capacity was 51 per cent as at last month, from 24 per cent in April last year.

The airline expects passenger capacity during the current April to June quarter to rise to 61 per cent of pre-Covid-19 levels, and to 67 per cent during the July to September quarter this year.

This comes as Changi Airport reported that traffic was back to 50 per cent of pre-Covid-19 levels.

Some analysts have turned cautiously upbeat on the stock.

DBS Group Research upgraded its call on the Singapore flag carrier to "buy" from "hold" on Tuesday and raised its target price to $6.20 from $4.90, after raising its net profit estimates. The research team noted that SIA's passenger traffic will most likely recover faster than anticipated, as reopening in the Asia-Pacific region continues to pick up momentum.

As at yesterday, SIA and Scoot's route network comprised 95 destinations in 37 countries and territories (including Singapore), versus 137 destinations in 37 countries and territories pre-Covid-19.

The group carried 3.9 million passengers during the April 2021 to March 2022 financial year, up six-fold from the year before.

As of now, the SIA Group has an operating fleet of 176 passenger aircraft and seven freighters. Its fleet comprises 126 passenger aircraft and seven freighters, while Scoot has 53 passenger aircraft.

The average age of the fleet is six years and two months.

But there could be some turbulence ahead.

The airline warned that cargo demand - which was a star performer during the 2020 to 2021 Covid-19 era - could experience near-term volatility as a result of the Ukraine war and the lockdown in China.

But cargo yield will remain healthy because of the continued industry capacity crunch on key trade lanes, SIA said.

Inflationary pressures, in particular on fuel price, remain a concern.

About 43 per cent of the $1.33 billion increase in group expenditure was owing to net fuel costs. Average jet fuel price has risen 50 per cent over the past year to US$150 a barrel now.

SIA's fuel costs more than doubled to $1.38 billion in the six months up to and including March as it operated more flights. Last year, SIA said that 30 per cent of its fuel for the October to March second half was hedged at an average US$57 per barrel of Brent.

SIA shares closed at $5.43 yesterday, up 10 cents from Tuesday's close.