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Mon, 1 August 2022

SIA Group Reports Record Q1 Operating Profit of SG$556 Million

(01 August 2022, 11:33 +07)  SIA Group capacity ramped up from an average of 47% of pre-pandemic levels in the fourth quarter of FY2021/22 to 61% in the first quarter of FY2022/23, allowing the company to capture pent-up demand.

As a result, the SIA Group posted a record first-quarter operating profit of $556 million, which was also the second-highest quarterly profit in its history (its highest ever quarterly operating profit was $675 million in Q3 FY2007/08). This came as the demand for air travel rose sharply after Singapore fully opened its borders to vaccinated travellers in April 2022.

SIA and Scoot carried 5.1 million passengers during the quarter up 158.2% from the previous quarter and fourteen-fold higher than a year before.

Passenger traffic and load factors were robust across all cabin classes and travel segments, as well as all regions except East Asia where border restrictions remain in certain markets.

SIA Group has reported a record Q1 Operating Profit of SG$556m. Picture by Steven Howard of TravelNewsAsia.com Click to enlarge.
SIA Group has reported a record Q1 Operating Profit of SG$556m. Picture by Steven Howard of TravelNewsAsia.com

SIAs quarterly revenue per available seat-kilometre was 10.2 cents, a record for the full-service airline.

Passenger flown revenue rose $1,456 million (+119.3%) quarter-on-quarter to $2,676 million on the back of a 126.7% growth in traffic. Passenger load factor rose 34.1 percentage points to 79%, the highest since the onset of the pandemic, as the traffic growth outpaced the capacity expansion of 28.9%.

Cargo flown revenue fell $17 million (-1.5%) to $1,096 million, as the demand for air freight dropped due to pandemic related lockdowns in China. The decline in cargo loads (-3.6%) was mitigated by higher yields (+2.2%), amid capacity constraints on key lanes especially between Asia and Europe. Consequently, group revenue rose $1,439 million (+58.2%) to $3,911 million.

Expenditure grew by $816 million (+32.1%) quarter-on-quarter to $3,355 million. This consisted of a $527 million jump (+70.6%) in net fuel costs, and a $289 million increase (+16.1%) in non-fuel expenditure. Net fuel cost rose to $1,273 million, mainly on the 40% increase in fuel prices (+$414 million) and higher volumes uplifted (+$187 million), which was partially offset by higher fuel hedging gains (-$91 million).

The 16.1% increase in non-fuel expenditure was well within the 28.9% increase in passenger capacity.

The group posted an operating profit of $556 million, a $623 million improvement from the $67 million loss in the previous quarter. On a year-on-year basis, this was better by $830 million from the previous year's operating loss of $274 million.

The group recorded a first quarter net profit of $370 million, versus a $210 million loss in the previous quarter (+$580 million). This was mainly due to the better operating performance (+$623 million), as well as the absence of $66 million in non-cash impairment charges, and partially offset by the tax expense incurred versus a tax credit last quarter (-$95 million).

This was also an improvement of $779 million from a year before due to the better operating performance (+$830 million), lower share of losses of associated companies (+$25 million), lower net finance charges (+$14 million), and partly offset by a tax expense versus a tax credit last year (-$107 million).

The group recorded an operating cash surplus of $1,480 million for the three months, a quarter-on-quarter improvement of $978 million.

First Quarter FY2022/23

As of 30 June 2022, the group shareholders equity was $22.9 billion, an increase of $0.5 billion from 31 March 2022. Cash and bank balances saw an increase of $2.3 billion, rising to $16.1 billion mainly due to net cash generated from operations including the proceeds from forward sales. As total debt balances remained at $15.7 billion, the groups debt-equity ratio fell from 0.70 times to 0.68 times. In addition to the cash on hand, the Group retains access to $2.2 billion of committed lines of credit, all of which remain undrawn.

Fleet Development

During the first quarter, SIA took delivery of two Airbus A350-900s, one of which joined the operating fleet.

Three Boeing 737-8s that were delivered in the previous financial year also entered into service during the first quarter. One 737-8 that was delivered during the quarter will join the operating fleet after cabin retrofit.

Scoot took delivery of one A320neo, which entered into service during the quarter together with two A321neo aircraft that were delivered in the previous quarter.

One A320ceo was removed from the operating fleet in preparation for lease return.

SIAs operating fleet comprised 127 passenger aircraft (23 777-300ERs, 12 A380s, 59 A350s, 15 787-10s, 7 737-800s and 11 737-8s) and seven freighters as of 30 June 2022, while Scoot had 55 passenger aircraft (10 787-8s, 10 787-9s, 20 A320ceos, 6 A320neos and 9 A321neos) in its operating fleet.

With an average age of six years and three months, the group continues to operate one of the youngest and most fuel-efficient fleets in the airline industry.

Network Development

During the quarter, SIA and Scoot reinstated services to several destinations in South East Asia (Cebu, Davao, Hat Yai, Kota Kinabalu and Medan), as well as Nanjing, China.

Scoot launched new services to Jeju, South Korea.

As of 30 June 2022, the groups passenger network covered 98 destinations (including Singapore) in 36 countries and territories, and is getting closer to the pre-pandemic network (137 destinations in 37 countries and territories, including Singapore).

SIA served 72 destinations (including Singapore), Scoot 47 destinations (including Singapore), and the cargo network comprised 107 destinations (including Singapore).

In response to the strong demand for air travel, the SIA Group will adjust the SIA and Scoot network in the Northern Winter operating season (30 October 2022 to 25 March 2023).

SIA will increase services to points across Japan, restore its Indian network to pre-pandemic levels, add more flights to Los Angeles and Paris, and continue its direct services to Vancouver.

Scoot will launch non-stop services to Tokyo (Narita) and Osaka, as well as add more flights to Bangkok, Cebu, Manila, Seoul and Surabaya.

Group capacity is projected to go up to around 68% of pre-pandemic levels in the second quarter of FY2022/23, and around 76% by the third quarter of FY2022/23.

Outlook

Travel demand is expected to remain robust in the near-term as the year-end holiday travel period approaches, with forward sales staying buoyant for the next three months up to October 2022.

While cargo demand from Asia has been recovering, this is being offset by seasonally slower air cargo activity during the summer. Yields are expected to remain higher than pre-COVID19 levels in the near to medium term as air cargo capacity remains tight on key trade lanes to and from Asia, particularly between Europe and Asia, amid the Russia-Ukraine conflict.

Changes to the COVID19 situation in China may also impact the ongoing recovery in the countrys export volumes.

Inflationary pressures including elevated fuel prices remain a concern while interest rate hikes and slowing economic growth in many countries around the world, including the SIA Groups key markets, are risk factors to passenger travel recovery and air cargo demand which the company is monitoring closely.

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