Category Archives: Singapore Airlines Cargo

SIA Group reduces its net yearly loss by 78%

SIA Group (Singapore Airlines) issued this financial report:

  • Passenger carriage for FY2021/22 up six-fold as travel restrictions ease
  • Record full-year cargo revenue on strong demand and robust yields
  • Operating cash surplus of $824 million for the full year
  • Strong momentum in forward sales across key markets and all cabin classes
  • Transformation programme reinforces SIA Group’s leadership position asoperations ramp upSIA GROUP FINANCIAL PERFORMANCE Financial Year FY2021/22 – Profit and LossThe SIA Group financial performance for the financial year FY2021/22 is summarised as follows:

The Singapore Airlines (SIA) Group carried 3.9 million passengers in FY2021/22, up six-fold from a year before, with international air travel recovering in the last six months as global border restrictions eased. The Group ramped up passenger capacity (measured in available seat-kilometres) in a calibrated manner, growing from 24% of pre-Covid levels in April 2021 to 51% by the end of FY2021/22 in March 2022.

Singapore’s launch and subsequent expansion of the Vaccinated Travel Lane (VTL) scheme was the game changer for the Group. It facilitated quarantine-free mass travel for the first time since the Covid-19 pandemic began, and significantly boosted the demand for flights to and through Singapore. By deploying capacity and increasing services in an agile manner, SIA and Scoot were among the first to launch flights for all VTL points. This allowed the carriers to capture the pent-up demand for air travel as it returned.

As a result, passenger flown revenue grew by $2,121 million (+309.6%) year-on-year to $2,806 million. This was on the back of a 614.9% growth in traffic (revenue-passenger kilometres), which outpaced the capacity expansion of 215.7% and resulted in the passenger load factor rising 16.8 percentage points to 30.1%. Cargo flown revenue reached a record $4,339 million (+$1,630 million or +60.2%), driven by strong demand amid continued capacity constraints for both sea freight and air freight. This led to a 44.5% increase in loads carried, and 10.8% rise in yields. Consequently, Group revenue rose $3,799 million (+99.6%) year-on-year to $7,615 million.

Group expenditure grew by $1,896 million (+30.0%) year-on-year to $8,225 million. This increase consisted of a $1,173 million increase (+115.5%) in net fuel costs, a $1,015 million increase (+19.9%) in non-fuel expenditure, and an offset of $292 million from the year-on-year impact of the fuel hedging ineffectiveness recorded last year, as well as fair value changes on fuel derivatives. Net fuel cost rose to $2,189 million, mainly on higher fuel prices (+$1,081 million) and an increase in volume uplifted (+$661 million), which was partially offset by a swing from a fuel hedging loss to a gain (-$553 million). The increase in non-fuel expenditure by 19.9% was well within the 215.7% increase in passenger capacity and the 50.1% increase in cargo capacity.

The SIA Group recorded an operating loss of $610 million, an improvement of $1,903 million (+75.7%) from the $2,513 million loss a year before.

Impairment charges for aircraft of $51 million were recorded for the year (-$1,683 million or -97.1% year-on-year). This was mainly due to impairment charges for two Boeing 737-800s deemed surplus to requirements, as well as a further write-down to three previously impaired 777-300ERs due to a change in aircraft trade-in plans. This follows a review of the Group’s network requirements, as well as the market values of the aircraft in its fleet in FY2021/22.

The Group posted a net loss of $962 million for the year, an improvement of $3,309 million (+77.5%). This was primarily driven by better operating performance (+$1,903 million) and lower non-cash impairment charges (+$1,894 million), and partially offset by a $532 million reduction in tax credit due to the lower net loss.

The Group recorded an operating cash surplus1 of $824 million for FY2021/22, an improvement of $3,195 million on the back of its stronger performance.

Second Half FY2021/22 – Profit and Loss

The Group recorded an operating profit of $10 million for the six months to 31 March 2022, compared to a $620 million operating loss in the first half (+$630 million). This came as borders reopened in almost all key markets, and as the rapid expansion of VTLs during the six months supported the demand for air travel.

Group revenue rose $1,961 million (+69.4%) half-on-half to $4,788 million. Passenger flown revenue increased by $1,300 million (+172.6%) to $2,053 million as passenger traffic grew 257.2%, outpacing the 46.2% expansion in capacity. As a result, passenger load factor improved 23.4 percentage points to 39.6% in the second half. Cargo flown revenue increased by $589 million (+31.4%) as the yields (+22.1%) and loads carried (+7.6%) were elevated by the strong cargo demand.

Group expenditure grew by $1,331 million (+38.6%) half-on-half to $4,778 million. This increase consisted of a $569 million increase (+70.2%) in net fuel costs, a $682 million increase (+25.1%) in non-fuel expenditure, and $80 million from the half- on-half impact of the fair value changes on fuel derivatives. Net fuel cost rose to $1,379 million, mainly on higher fuel prices (+$354 million) and an increase in volume uplifted (+$323 million), which was partially offset by higher fuel hedging gain (-$115 million). The increase in non-fuel expenditure by 25.1% corresponded with the 46.2% increase in passenger capacity and 21.7% increase in cargo capacity.

Group net loss was $125 million for the second half, an improvement of $712 million (+85.1%) from the first half. This was mainly attributable to the better operating performance (+$630 million) as well as an improvement in share of results of joint venture and associated companies (+$100 million), and partially offset by higher non-cash impairment charges (-$29 million).

Financial Year FY2021/22 – Balance Sheet

The Group has raised $22.4 billion in fresh liquidity since 1 April 2020 through various measures including proceeds from Rights issuances, bond issuances, secured financing, and aircraft sale-and-leaseback transactions.

Note 1: Includes net cash provided by operating activities and repayment of lease liabilities, and excludes proceeds from forward sales.

As of 31 March 2022, the Group shareholders’ equity was $22.4 billion, an increase of $6.5 billion from 31 March 2021. Cash and bank balances saw an increase of $6.0 billion, rising to $13.8 billion primarily due to the proceeds from the Mandatory Convertible Bond issue in June 2021. Total debt balances increased by $1.4 billion to $15.7 billion, mainly due to the issuance of a seven-year US$600 million (or about S$810 million) bond in January 2022, as well as the increase in lease liabilities as a result of sale-and-leaseback activities. Consequently, the Group’s debt-equity ratio fell from 0.90 times to 0.70 times. In addition to the cash on hand, the Group retains access to $2.1 billion of committed lines of credit, all of which remain undrawn.

FLEET DEVELOPMENT

During the final quarter, SIA took delivery of one Airbus A350-900, which joined the operating fleet in January 2022. SIA also took delivery of three Boeing 737-8s, which will enter into service starting from June 2022. Scoot took delivery of three Airbus A321neo aircraft, which have since joined the operating fleet.

As of 31 March 2022, SIA’s operating fleet comprised 123 passenger aircraft and seven freighters, while Scoot had 53 passenger aircraft in its operating fleet.

With an average age of six years and three months, the Group operates one of the youngest and most fuel-efficient fleets in the airline industry4. This results in increased operating efficiencies, as well as significantly lower carbon emissions compared to the older generation aircraft that they replace in the Group fleet.

NETWORK RECOVERY

The Group progressively reinstated services to several destinations, and stepped-up frequencies on existing routes, as travel restrictions eased. Services resumed across key markets including Australia (Cairns, Darwin, and Gold Coast), South East Asia (Danang, Denpasar, and Surabaya), Amritsar in India, and Cape Town (via Johannesburg) in South Africa. SIA resumed non-stop A350-900 ULR services between Singapore and Newark, and began operating its flagship Airbus A380 to India (Delhi and Mumbai), and the United States of America (New York via Frankfurt). Services to Moscow and Shenzhen were suspended during the fourth quarter. Scoot introduced a new destination, Miri, to its network.

At the end of the financial year, the Group’s passenger network covered a total of 93 destinations5 in 36 countries and territories, up from 85 at the end of the third quarter. This compared to a pre-Covid network of 137 destinations5 in 37 countries and territories. SIA served 69 destinations5 and Scoot 43 destinations5. The Group’s cargo network comprised 100 destinations,5 up from 98 at the end of the prior quarter.

Note 2: The 123-passenger aircraft fleet comprised 23 777-300ERs, 12 A380s, 58 A350s, 15 787-10s, 7 737-800s and 8 737-8s.

Note 3: The 53-passenger aircraft fleet comprised 10 787-8s, 10 787-9s, 21 A320ceos, 5 A320neos and 7 A321neos.

Note 4: The current industry average fleet age is around 15 years and 4 months according to Centre for Asia Pacific Aviation (CAPA). Note 5: Number of destinations include Singapore.

Based on current published schedules, the Group expects passenger capacity to reach 61% of pre-Covid levels for the first quarter of FY2022/23. As travel demand continues to recover, passenger capacity is expected to climb to around 67% of pre-Covid levels by the second quarter. The Group expects to serve over 70% of its pre- Covid destinations by the end of the second quarter.

PAVING THE WAY AHEAD

The SIA Group is ready to ramp up operations and capture the returning demand for international air travel. Cabin crew recruitment has resumed after a two-year hiatus to replace staff who have left over the last two years. The Group will continue to make the necessary investment in our people to meet our growth plans. Aircraft utilisation can also be increased quickly to support network expansion.

Various marketing campaigns have been launched to encourage customers to take to the skies again. These include a global brand campaign, We Look Forward to Seeing You in the Air Again, which promises customers an enhanced travel experience with SIA. Time to Fly, SIA’s first online travel fair in Singapore, offered curated travel packages with 10 participating travel agents, serving all market segments. Scoot re- established partnerships with tourism boards across Australia and South East Asia, as well as the Singapore Tourism Board, to incentivise travel to and from Singapore.

KrisFlyer, the SIA Group’s loyalty program, relaunched its KrisFlyer Spontaneous Escapes monthly promotion after two years. This allows members to stretch the value of their miles and book last minute getaways to a variety of SIA destinations.

Deepening collaboration with like-minded airlines remains an integral part of the Group’s strategy. By strengthening separate partnerships with Garuda Indonesia and Malaysia Airlines, the airlines will offer more options for customers, as well as enhanced connectivity to drive tourism in South East Asia. The recent expansion of the codeshare agreement between United Airlines and SIA will enable customers to connect to even more destinations within both airlines’ network.

The footprint of SIA’s cargo business continues to grow with the signing of a crew and maintenance agreement with DHL Express for five Boeing 777 freighters. These freighters will sport a dual DHL-SIA livery, and be operated by SIA pilots on routes to the United States of America via points in North Asia from July 2022. SIA will also oversee the maintenance of these aircraft. Basing these freighters at Changi Airport will further reinforce Singapore’s position as a key air logistics hub. It will support the fast- growing e-commerce segment, and also provide a foundation to expand the partnership between SIA and DHL in the future.

SIA has also firmed up an order for seven Airbus A350F freighters to replace its fleet of Boeing 747-400Fs. Deliveries will begin in the fourth quarter of 2025, and SIA will be the first operator of this new-generation aircraft. The renewal of the freighter fleet reflects SIA’s continued investment in its key air cargo segment.

SIA, the Civil Aviation Authority of Singapore, and Temasek have embarked on a year-long study into the operational viability of sustainable aviation fuels in Singapore. Jet fuel that has been blended with neat sustainable aviation fuel will be uplifted on SIA and Scoot flights from the third quarter of 2022 as part of this pilot. Sustainable fuels are a key decarbonisation lever for airlines, and a critical pathway for the success of the Group’s commitment to achieve net zero carbon emissions by 2050.

FINAL DIVIDEND

In view of the significant losses incurred and the need to conserve cash, the Board is not proposing a final dividend for the financial year ended 31 March 2022.

OUTLOOK

Singapore further relaxed border restrictions in April 2022, removing the need for quarantine, as well as both pre-departure and on-arrival Covid-19 tests for fully vaccinated travellers. Key markets around the world have further eased travel restrictions, supporting a strong recovery in demand in air travel across all cabin classes. Forward sales, when measured as a percentage of the total number of seats available, in the next three months up to August 2022 are approaching pre-Covid-19 levels. The Group will closely monitor demand, remain nimble and alert to all opportunities that may arise, and adjust its capacity and services accordingly.

Cargo demand is expected to experience near-term volatility as a result of the Russia-Ukraine conflict, as well as the knock-on effects of pandemic controls in China on the global supply chain. Cargo yields, however, are likely to remain healthy due to the continued industry capacity crunch on key trade lanes.

Inflationary pressures, in particular on fuel prices, remain a concern. In comparison to the average jet fuel price of US$90.31 per barrel (before hedging) for FY2021/22, spot prices have moved up by more than 50% and were close to US$150 per barrel, as of early May. The Group will maintain appropriate cost discipline, even as operations expand in line with demand.

The Group’s second three-year Transformation programme, that began in FY2020/21, continues to make good progress in revenue and cost initiatives as well as in the areas of innovation and digital transformation. The SIA Group will remain agile and leverage on opportunities to reinforce its leadership position in the airline industry.

Singapore Airlines aircraft photo gallery:

Singapore Airlines to operate Boeing 777F freighters for DHL

DHL Express, the world’s leading international express services provider, has entered into a Crew and Maintenance agreement (CM) with Singapore Airlines (SIA) to deploy five Boeing 777 freighters. This agreement marks a further step in DHL Express’ expansion of its intercontinental air network to meet customer demand in fast-growing international express shipping markets.

Mr Travis Cobb, Executive Vice President Global Network Operations and Aviation, DHL Express, said: “With the deployment of five Boeing 777 freighters, we can expand our express service linking the Asia Pacific region with the Americas. Following the pandemic, we see good prospects for strong growth in trans-Pacific trade lanes. By collaborating with Singapore Airlines, we see a unique chance to establish a long-lasting relationship with a long time partner who shares common values and operates at the highest standard.”

Based at Singapore’s Changi Airport and serving DHL’s South Asia Hub there, the freighters, which will sport a dual DHL-SIA livery, will be operated by SIA pilots on routes to the United States of America via points in North Asia. SIA will also oversee the maintenance of these aircraft.

The initial agreement is set for more than four years with the opportunity for an extension. As part of the agreement, the first aircraft delivery will be in July 2022, with the second in October 2022. The remaining three aircraft are planned for delivery throughout 2023.

DHL Express continuously invests to meet steady growth in cross-border time-sensitive shipments. It operates over 320 dedicated aircraft across its global network of 220 countries and territories. The Boeing 777 freighters are the world’s largest, longest range, and most capable twin-engine freighters that also contribute to DHL’s sustainability goals, reducing CO2 emissions by 18% compared to the legacy Boeing 747-400s.

SIA’s cargo division operates to more than 90 destinations as part of its current network, which includes a fleet of freighters as well as the bellyhold space of the SIA and Scoot passenger aircraft. The airline recently ordered Airbus A350F freighters as part of its fleet renewal programme. SIA continues to invest in its cargo capabilities, capitalising on healthy demand fuelled by growth in e-commerce, fresh produce, and pharmaceuticals, among other segments.

SIA finalizes its order for the new Airbus A350F

Singapore Airlines (SIA) has finalized a purchase agreement with Airbus for seven A350F freighter aircraft. The order was signed at the Singapore Airshow by SIA CEO Goh Choong Phong, and Airbus Chief Commercial Officer and Head of International Christian Scherer.

The order firms up the carrier’s commitment to the new generation freighter announced by the plane maker in December 2021. The newly ordered aircraft will replace the carrier’s existing 747-400F fleet from the fourth quarter of 2025.

Singapore Airlines selects the world’s newest freighter – the Airbus A350F

Singapore Airlines (SIA) has signed a Letter of Intent (LoI) with Airbus for seven A350F freighter aircraft. The agreement will see the A350F begin replacing the airline’s existing B747-400F fleet in the fourth quarter of 2025.

Earlier this year Airbus received Board of Directors approval for a freighter derivative of the A350 designed to meet the imminent wave of large freighter replacements and the evolving environmental requirements, shaping the future of airfreight. The A350F will be powered by latest technology, fuel-efficient Rolls-Royce Trent-XWB97 engines.

As part of the world’s most modern long-range family, the A350F will have a high level of commonality with the A350 passenger versions. With a 109 tonne payload capability, the  A350F will serve all cargo markets. The aircraft features a large main deck cargo door, with its fuselage length and capacity optimized around the industry’s standard pallets and containers.

Over 70% of the airframe will be made of advanced materials, resulting in a 30 tonne lighter take-off weight and generating at least 20% lower fuel consumption and emissions over its current closest competitor. The A350F will fully meet ICAO’s enhanced CO₂ emissions standards coming into effect in 2027.

Singapore Airlines is the world’s largest operator of the A350, with 56 aircraft currently in service across its network. The agreement with Singapore Airlines is the third commitment received for the new A350F over the past month.

Singapore Airlines Group reports its largest annual loss, deems 414 aircraft to be “surplus”

Singapore Airlines Boeing 777-312 ER 9V-SWV (msn 42236) ZRH (Rolf Wallner). Image: 950270.

Singapore Airlines Ltd recorded its second-consecutive annual loss, widening to a record S$4.27 billion ($3.20 billion).

The airline issued this report:

Passenger traffic down 97.9% due to global restrictions on international travel • Strong cargo revenues cushioned plunge in passenger contributions • $2.0 billion non-cash impairment charge largely on removal of 45 older aircraft • Proposed issuance of additional mandatory convertible bonds to strengthen Group’s liquidity position in order to navigate crisis and secure future growth • Transformation program reinforces foundation for SIA Group to emerge stronger

GROUP FINANCIAL PERFORMANCE

Financial Year 2020/21 – Profit and Loss

The Covid-19 pandemic, which began to spread globally in February 2020, resulted in unprecedented restrictions on international air travel at the start of the financial year. Successive waves of Covid-19 infections and more virulent strains emerged over the course of the 12 months. As a result, the Singapore Airlines (SIA) Group’s passenger traffic (measured in revenue passenger-kilometers) shrank 97.9% in the financial year ended 31 March 2021 from a year before.

Group revenue fell by $12,160 million (-76.1%) year-on-year to $3,816 million due to the plunge in passenger flown revenue across Singapore Airlines, SilkAir and Scoot – the three passenger airlines within the Group. This was partially offset by higher cargo flown revenue, which rose by $758 million (+38.8%) year-on-year to $2,709 million. Improvements in freighter utilization, deployment of passenger aircraft for cargoonly flights, and removing seats from passenger cabins to create additional volume for cargo partially mitigated the loss of passenger aircraft bellyhold capacity during the pandemic. Strong air cargo demand, especially in key segments such as e-commerce, pharmaceuticals and electronics, provided strong support for both cargo load factors and yields amid tight industry cargo capacity.

Group expenditure came in at $6,329 million, down $9,588 million (-60.2%). Net fuel cost fell $3,620 million (-78.1%) to $1,016 million due to capacity cuts and lower fuel prices in the first half of the year. Non-fuel expenditure reduced by $5,472 million (-51.8%) to $5,099 million on the back of capacity cuts, cost-saving initiatives, staffrelated measures, and government support schemes.

Mark-to-market losses of $497 million were recognized on ineffective fuel hedges, following downward adjustments to the expected rate of capacity recovery and the corresponding fuel consumption. This was partially mitigated by a $283 million fair value gain on fuel hedges after a rise in fuel prices in the second half of the year. The Group has paused fuel hedging activity since March 2020.

The Group swung into an operating loss of $2,513 million in FY2020/21, a reversal of $2,572 million from the $59 million operating profit recorded last year.

For the financial year ended 31 March 2021, the Group reported a net loss of $4,271 million, a deterioration of $4,059 million against last year. This was driven by both the weaker operating performance and non-cash impairment charges, partially offset by a $623 million increase in tax credit due to the higher net loss recorded by the Group. The impairment charges include:

• Impairment charge of $1,448 million recorded in the first half on 332 aircraft deemed surplus to fleet requirements. Another $286 million impairment charge on surplus aircraft was recorded in the second half following a further review of the network requirements and market values of the fleet. This pertained mainly to four additional 777-300ERs and eight 737-800NGs deemed surplus to fleet requirements, as well as a further write-down on four of the A320s impaired in the first half due to a reduction in their market values. This brings the total impairment charge on 45 surplus aircraft for the year to $1,734 million.

• Impairment of goodwill of $170 million, that was recorded when SIA first gained control of Tiger Airways in October 2014, after a review of the impact of Covid-19 on business conditions in the first half of FY2020/21.

• SIA Engineering Company’s impairment of base maintenance assets ($35 million) recorded in the first half due to significant decline in hangar revenue projections. Subsequently, a further $2 million impairment charge was recognized in the second half, alongside a $11 million impairment on an investment in an engine program. The total impairment recorded by SIA Engineering Company for the financial year ended 31 March 2021 was $48 million.

FLEET AND NETWORK

The Group operating fleet currently consists of 162 passenger aircraft and seven freighters. This excludes 414 aircraft which are deemed surplus to the Group’s requirements, six Boeing 737 MAX 8s that have been temporarily withdrawn from service, and two aircraft (one Airbus A330 and one Airbus A320) that left the operating fleet in preparation for lease returns.

During the fourth quarter, the Group continued to expand its network in a calibrated manner by resuming services to some destinations, and adding frequencies to some existing points. The transfer of narrow-body services from SilkAir to SIA began on 4 March, starting from Phuket. At 31 March 2021, SIA served 47 destinations including Singapore, up from 38 at the end of December 2020. SilkAir served five destinations, down from eight, while Scoot’s network increased by one to 18 destinations. By the end of the financial year, the Group’s passenger network covered 60 destinations including Singapore, compared to 54 three months earlier. The Group’s cargo network comprised 72 destinations including Singapore, up from 66 as at 31 December 2020.

Based on our current published schedules, the Group expects the passenger capacity to be around 28% of pre-Covid levels by June 2021. By July 2021, the Group capacity is expected to reach around 32% of pre-Covid levels, and we expect to serve around 49% of the points that were flown before the crisis.

Even though mass vaccination exercises are in progress in most of our major markets, the prognosis for the global airline industry remains uncertain. While domestic markets have recovered in some countries, international air travel remains severely constrained and its recovery trajectory is still unclear.

Above Copyright Photo: Joe G. Walker.

TRANSFORMING TO EMERGE STRONGER AND FITTER

The integration of SilkAir’s narrow-body operations with Singapore Airlines began on 4 March 2021, with the first SIA Boeing 737-800 NG aircraft operating to Phuket. Nine 737-800 NG aircraft have joined the SIA fleet. The integration will deliver greater economies of scale for the Group, and enhance the flexibility of aircraft deployment to meet the demand for air travel as it returns.

Robust health and safety measures have been and continues to be a key focus area for the SIA Group, to safeguard the well-being of our customers and staff. Over 100 touch points have been reviewed throughout the customer journey with enhancements made, supported by digital technologies. These efforts were recognized with both SIA and Scoot being awarded the Diamond certification in the Airline Passenger Experience Association (APEX) Health Safety powered by Simpliflying audit of global airlines. The Diamond rating is the highest level attainable, indicating that an airline has put in place hospital-grade health safety measures, processes and training, along with an end-to-end focus on wellness.

SIA is also the world’s first airline to pilot the International Air Transport Association’s (IATA) Travel Pass mobile application for digital health verification, further enhancing convenience along the customer journey. SIA plans to integrate the entire digital health verification process into the SingaporeAir mobile app from around mid2021, using IATA’s Travel Pass framework.

The SIA Group was among the first in the industry to vaccinate its frontliners, including cabin crew and pilots, providing added safety and reassurance for both our customers and staff members. Around 98% of SIA Group pilots and cabin crew have signed up for the vaccine, of which 96% have been fully vaccinated with both doses. On 11 February 2021, Singapore Airlines, SilkAir and Scoot became among the first carriers in the world to operate flights with a full complement of vaccinated pilots and cabin crew.

SIA is committed to continuously improving its capabilities in transporting high-value, time-sensitive, and temperature-controlled pharmaceutical cargo through its THRUCOOL service. This contributed to SIA’s early readiness to perform the important mission of transporting Covid-19 vaccines safely and reliably. In addition to transporting Covid-19 vaccines to Singapore, SIA Cargo has carried vaccines to countries in Asia and the South West Pacific region, including under the UNICEF vaccine transportation program.

Upon receiving IATA’s Centre of Excellence for Independent Validators in Perishable Logistics (CEIV Fresh) certification in February 2021, SIA launched THRUFRESH, a new service that transports temperature-sensitive perishable cargo with speed and care.

OUTLOOK

Despite the resurgence of Covid-19 infections in many parts of the world, the growing pace of mass vaccination exercises in key markets provides hope for further recovery in international air travel demand in the second half of 2021. Singapore Airlines strongly supports all efforts to further open borders in a safe and calibrated manner. The Group expects to continue with a measured expansion of the passenger network, and will remain nimble and flexible in adjusting capacity to meet the demand for air travel.

Strong fundamentals continue to drive air cargo demand, with healthy Purchasing Managers’ Index readings across many key export economies. Demand from the e-commerce and pharmaceutical segments, among others, remains robust. SIA is well positioned to capture more Covid-19 vaccine shipments into the Asia Pacific region as vaccine production ramps up and exports grow.

SIA’s new Transformation program has made good progress in its first year despite the headwinds from Covid-19. With a commitment to deliver on its brand promise in product quality and service excellence, the Company has pressed on with a suite of initiatives to enhance customer experience, focusing on measures to safeguard customers’ well-being and reduce friction across the travel journey. SIA will continue to progress its digital transformation journey, prioritizing an enhancement of its core offering and increasing its operational resilience.

SIA is also actively pursuing new engines of revenue growth, as well as initiatives to achieve a more competitive cost base to secure its future financial sustainability. The Group will continue to exercise discipline on costs and cash management.

The Group is grateful to have received strong support from its shareholders, lenders, investors, and the Singapore government, to raise capital, provide liquidity and to manage costs. We are thankful to our customers who continue to support us, and to our staff for their sacrifices and staying resilient. The Group is committed to work closely with key stakeholders within the aviation ecosystem to navigate through the ongoing crisis and emerge stronger.

Top Copyright Photo: Singapore Airlines Boeing 777-312 ER 9V-SWV (msn 42236) ZRH (Rolf Wallner). Image: 950270.

Singapore Airlines aircraft slide show:

Singapore Airlines Group’s net profit declines by 55.5% to S$126 million ($97.7 million), reports demand is flat

Singapore Airlines Group (Singapore Airlines, Scoot, SilkAir and Singapore Airlines Cargo) (Singapore) reported its net profit in the first half was down by $157 million (a decline of 55.5%) year-on- year to S$126 million ($97.7 million US).

The group issued this full statement:

GROUP FINANCIAL PERFORMANCE

First Half 2014-15

The Group earned an operating profit of $171 million in the first half of the 2014-15 financial year, an improvement of $2 million (+1.2%) over the same period last year.

Group revenue was down $154 million (-2.0%) to $7,587 million, mainly due to lower incidental revenue stemming from reduced compensation pertaining to changes in aircraft delivery slots [see Note 2], and lower income from the lease of aircraft, due to the expiry of leases to Royal Brunei Airlines. Passenger revenue was lower year-on-year (-0.4%), notwithstanding a 1.4% increase in traffic, as a result of yield declines (-1.8%) amid the competitive operating environment and depreciating revenue-generating currencies, led by the Australian Dollar and Japanese Yen. Cargo revenue fell 1.6%, driven by a capacity cut (-3.8%), though this was partially compensated for by better yields and higher load factor.

Group expenditure at $7,416 million declined $156 million (-2.1%) over the previous financial year. Fuel costs after hedging fell $107 million, attributable to lower volume uplifted (-3.2%), the weaker US Dollar against the Singapore Dollar, and a 0.4% decline in jet fuel price after hedging.

Note 1: The SIA Group’s unaudited financial results for the half year and second quarter ended 30 September 2014 were announced on 6 November 2014. A summary of the financial and operating statistics is shown in Annex A. (All monetary figures are in Singapore Dollars. The Company refers to Singapore Airlines, the Parent Airline Company. The Group comprises the Company and its subsidiary, joint venture and associated companies).

Note 2: The settlement agreement was reached in Q1 FY1314 and $92 million was recognised in the first half of FY1314, of which $59 million pertained to change in prior years. $34 million compensation was recognised in the first half of FY2014-15.

Group net profit in the first half was down $157 million (-55.5%) year-on- year to $126 million. The share of results of associated companies fell $154 million, largely attributable to the Group’s share of Tiger Airways’ loss of $129 million, which included material charges relating to the sublease of surplus aircraft and sale of Tigerair Australia. The commencement of equity accounting for Virgin Australia from the second quarter further contributed to the weaker results (-$16 million). Exceptional items accounted for a loss of $10 million in the first half, compared to a net exceptional gain of $22 million last year [see Note 3]. These were partly offset by higher gains on disposal of aircraft, spares and spare engines (+$31 million).

The Parent Airline Company’s operating against the corresponding period last year. Revenue was down $151 million (-2.4%), arising from reduced incidental revenue [see Note 2] and passenger revenue. The fall was nearly offset by a $148 million (-2.4%) reduction in expenditure, due to lower fuel costs after hedging, and stringent cost management. Unit ex-fuel cost was down 3.9% year-on-year.

SIA Engineering’s operating profit declined $19 million (-33.9%). Total revenue fell by $4 million (-0.7%) as a result of lower airframe and component overhaul revenue, offset in part by higher fleet management revenue. Expenses rose by $15 million (+2.8%), primarily as a result of an increase in subcontract services.

SilkAir’s operating profit declined $17 million (-77.3%), as weaker yields (-5.0%) put a drag on revenue and capacity injection (+3.7%) pushed operating expenditure up.

SIA Cargo’s operating loss narrowed by $37 million from last year. With better capacity management, yields and load factor were up 1.9% and 0.2 percentage points, respectively.

Note 3: Exceptional items in the first half of FY1415 pertained to the Parent Airline Company’s provision for settlement with plaintiffs in the Transpacific Class Action ($11 million), SIA Cargo’s additional impairment on two marked-for-sale B747-400F aircraft ($7 million), partly offset by additional gain on sale of Virgin Atlantic Limited (VAL) to Delta Air Lines, Inc. ($7 million), and partial refund of fine on appeal from the Korean Fair Trade Commission ($1 million). Exceptional items in the first half of FY1314 was $22 million, mainly pertaining to gain on sale of VAL ($339 million), partially offset by SIA Cargo’s impairment on four B747-400 aircraft removed from operation ($293 million) and SFC’s impairment loss on its assets with the closure of its Maroochydore operations ($24 million).

Second Quarter 2014-15

Group operating profit for the second quarter improved $45 million (+51.7%) to $132 million.

Group revenue was almost flat at $3,905 million. Passenger revenue increased marginally, as higher passenger carriage was largely offset by a 0.9% decline in yields. Cargo revenue was down 0.5% on the back of lower capacity (-4.1%), but was mitigated by improved yields (+2.8%).

Group expenditure declined $41 million (-1.1%) to $3,773 million. Fuel costs before hedging fell $115 million, partially offset by a loss on fuel hedging, compared to a hedging gain in the same quarter last year (+$76 million).

Group net profit was down $70 million (-43.5%) year-on-year to $91 million. This was largely attributable to weaker results from associated companies (-$138 million), partly mitigated by higher operating profit (+$45 million), and higher gains on disposal of aircraft, spares and spare engines (+$35 million).

FIRST HALF 2014-15 OPERATING PERFORMANCE

The Parent Airline Company’s passenger carriage (in revenue passenger kilometres) increased marginally by 0.1%, while capacity (in available seat-kilometres) dipped 0.2% during the first half of the financial year. As a result, passenger load factor improved by 0.2 percentage points to 79.8%.

SilkAir recorded a 0.4 percentage-point increase in passenger load factor to 69.7%, as its 4.2% growth in traffic outpaced capacity injection of 3.7%.

SIA Cargo reduced its capacity (in capacity tonne-kilometres) by 3.8%. Airfreight carriage (in load tonne-kilometres) declined by 3.4%. Consequently, cargo load factor improved 0.2 percentage points to 62.2%.

No. 05/14 6 November 2014 Page 4 of 6

INTERIM DIVIDEND

The Company is declaring an interim dividend of 5 cents per share (tax exempt, one-tier), amounting to $59 million, for the half-year ended 30 September 2014. The interim dividend will be paid on 27 November 2014 to shareholders as of 18 November 2014.

FLEET AND ROUTE DEVELOPMENT

The Parent Airline Company took delivery of two Airbus A330-300s in the second quarter. As at September 30, 2014, the operating fleet of the Parent Airline Company comprised 105 passenger aircraft – 57 Boeing 777s, 29 Airbus A330-300s and 19 A380-800s, with an average age of 7 years.

During the quarter, SilkAir took delivery of two Boeing 737-800 aircraft, sold one Airbus A320-200 and decommissioned another A320-200 in preparation for return to lessor. As at September 30, 2014, its operating fleet comprised 26 aircraft – 14 Airbus A320-200s, six A319-100s and six Boeing 737-800s.

There was no change to Scoot’s fleet during the July-September quarter, comprising six Boeing 777-200s.

SIA Cargo operated a fleet of eight Boeing 747-400 freighters at September 30, 2014, the same as the previous quarter. It suspended freight operations to Lagos from July 29, 2014, and added services to Amsterdam, Brussels and Delhi in September to cater to seasonal demand.

In the Northern Winter season (October 26, 2014 – March 28, 2015), the Parent Airline Company will increase capacity to Auckland with daily Airbus A380 services, replacing the smaller Boeing 777-300 ER. To cater to peak period demand, three additional weekly services will be operated to Melbourne and Sydney, and two additional weekly services will be operated to Brisbane and Christchurch, from the end of November 2014 to January 2015. In addition, three weekly services will be operated to Sapporo from December 2014 to mid-January 2015. As part of a service restructuring to the Middle East, flights to Cairo and Riyadh have been suspended from October 2014. SilkAir suspended its twice-weekly services to Solo with effect from October 26, 2014. From December 12, 2014, it will begin daily services to Denpasar. Together with the Parent Airline Company, a total of five daily trips will be served between Singapore and the city, subject to regulatory approval. This will bring the combined network of both airlines to 99 cities in 35 countries.

OUTLOOK

The operating landscape for the airline industry remains competitive and challenging, as an uncertain global economic climate and geopolitical concerns persist.

Demand is generally flat, and yields will remain under pressure amid intense competition from other airlines and promotional activities in weaker markets.

Airfreight demand has seen a moderate recovery in recent months, with demand projected to be stronger in the third quarter as a result of the traditional peak period in the lead-up to Christmas. However, overcapacity in the airfreight market is expected to continue to put pressure on yields.

While there has been a reprieve from cost pressures arising from the decline in fuel prices in recent months, there is concern that the decline reflects a slow- down in major economies in the world which could ultimately hurt travel demand.

The Group will continue to track market movements closely and make appropriate adjustments to capacity, while practising cost discipline in all business areas. With a strong balance sheet, the Group is well positioned to meet the challenges ahead.

Analysis of the financial report:

Comment by Kelvin Wong of www.cityindex.com.sg

Earnings per share for 1H 2014/2015 has declined to $0.107 from $0.24 (y/y) which represents a sharp drop of 55%. Similar for Q2 2014/205 which EPS has declined to 7.7 from 13.6 (y/y) which translates to a 76% decline.

This poor performance has been contributed by its subsidiaries’ contribution towards the SIA Group’s operating profit where we see poor performance in SIA Engineering & SilkAir (both decline drastically by 33.9% and 77.3% respectively from 1H 2013/2014 to 1H 2014/2015.)

Going forward, SIA Group is likely to see downside pressure on its bottom-line due to intense competition from budget airline operators and economic risks such as the spread of Ebola that will hamper international travel.

Technically, SIA is still trading in a multi-year sideways configuration since Nov 2011 and in order to see a change of trend to the upside, it needs to break above the key resistance at 10.92

Link to Kelvin’s page at http://www.cityindex.com.sg/market-talk/analysts/kelvin-wong/

Copyright Photo: SPA/AirlinersGallery.com. Singapore Airlines’ Airbus A380-841 9V-SKL (msn 058) arrives in London (Heathrow).

Singapore Airlines: AG Slide Show

Singapore Airlines Cargo adds Chongqing in China

Singapore Airlines Cargo (Singapore) added Chongqing in China on November 24 with twice-weekly cargo service.

Copyright Photo: Brian McDonough.

Singapore Airlines Cargo Slide Show: CLICK HERE

Singapore Airlines Cargo to launch a new cargo route to Frankfurt

Singapore Airlines Cargo (Singapore) will launch a twice-weekly cargo route to Frankfurt on November 2.

Copyright Photo: Brian McDonough.