SINGAPORE - The Covid-19 pandemic was a once-in-a-generation catastrophe that nearly devastated the global airline industry but it also taught Singapore Airlines (SIA) valuable lessons on how to be agile, survive and search for funding when revenues fell through the floor.
So said chief executive Goh Choon Phong as he recollected the experience of the past two years at a briefing on Thursday morning (May 19).
"During the final quarter of 2019, we were into the first phase of our business transformation plan, all cylinders firing," Mr Goh said. "We had record passenger numbers and record profits, and everything was looking good. Then everything suddenly collapsed in late January 2020."
Indeed, by late April 2020, SIA could operate at only 3 per cent of its pre-Covid-19 capacity to 18 destinations, it was burning cash at a rate of more than $300 million a month and revenue had slumped, forcing it to turn to shareholders and the market for funding.
The group has raised $22.4 billion in fresh liquidity since April 1, 2020.
This includes $15 billion from shareholders through a combination of mandatory convertible bonds (MCBs), rights shares, secured financing and sale-and-leaseback arrangements. SIA also has an additional $2.1 billion available in untapped lines of credit.
"We never had to reach out to so many sources for funding," Mr Goh recalled. "It was a learning process. Should something similar happen again, which I hope not, we know what to do. The whole experience has made us more agile and more resilient."
On Wednesday, SIA reported a net loss of $962 million for the financial year ended March 2022, compared with the $4.3 billion loss a year earlier.
Revenue grew from $3.8 billion to $7.6 billion as travel demand picked up from late last year.
The group halved its core net loss to $1.1 billion, helped largely by a doubling of cargo profits.
While it incurred a net loss for the last financial year, SIA recorded an operating cash surplus of $824 million for the full financial year after burning through cash in the 2021 financial year.
The results would have been better if not for the restrictions imposed on vaccinated travel lanes in late December 2021 through to mid-February this year amid the emergence of the new Omicron variant of the coronavirus.
But, since April 1 this year, when Singapore lifted all travel restrictions, demand has taken off exponentially.
The airline carried 1.45 million passengers last month compared with 110,000 in April last year.
With travel demand surging, the company expects passenger capacity to hit 61 per cent of pre-Covid-19 levels in this quarter and 67 per cent during the following three months.
This is the first time the company has provided such forward guidance.
Mr Mak Swee Wah, SIA's executive vice-president (operations), said the airline had started actively recruiting staff, including some furloughed cabin crew, over the past two months.
Mr Tan Kai Peng, executive vice-president (finance and strategy), noted that the appreciating United States dollar and rising fuel costs would be challenges for the airline as activity and operations ramp up.
He added that the company would review the need to hold such huge cash holdings - currently at almost $14 billion - as the business environment picks up.
With Brent crude at over US$110 a barrel and jet fuel at more than US$150 a barrel, costs will be a major challenge.
SIA has 40 per cent of its fuel needs hedged at an average Brent strike price of US$60 a barrel going forward a year.
Mr Tan also said there were no immediate plans for the redemptions of the MCBs.
Asked about soaring prices of tickets, Mr Lee Lik Hsin, executive vice-president (commercial), said prices were a function of demand and supply.
While prices are high going into the next two months, this is also due to the traditionally busy travel season. Mr Lee expects prices to pull back going into the latter part of third quarter.
He also noted that demand for corporate travel is picking up very strongly.
In the past, corporate spending, especially on premium seats, has accounted for around 40 per cent of SIA's income.
SIA and its budget arm Scoot's route network comprises 95 destinations in 37 countries and territories, including Singapore, compared with 137 destinations in 37 countries and territories pre-Covid-19.
SIA's fleet of 176 passenger aircraft and seven freighters has an average age of around six years, one of the youngest in the world.