SIA records first ever full-year loss with red ink of S$212m, almost all incurred since Covid-19 outbreak

SINGAPORE — National carrier Singapore Airlines (SIA) on Thursday (May 14) reported a full-year net loss for its latest full financial year, the first in its 48-year history, as the grounding of aircraft worldwide amid the Covid-19 pandemic, including by SIA, took a heavy toll.

The airline's financial results were announced after trading ended on Thursday, with SIA’s share price closing at a 30-year low of S$3.81. This time last year, the counter was trading at S$6.72. The current nadir is the lowest since 1990, when its shares slid to S$3.25 on a rights-adjusted basis.

As the global pandemic crippled demand for travel, one of Singapore’s best known blue chip companies — a national icon — lost S$212 million in the year ending March 31, dramatically reversing a S$683 million net profit earned in the previous financial year. That’s a reversal of almost S$900 million.

Almost all of the losses came in the fourth quarter of SIA’s fiscal year, from January to March, coinciding with the first impact of the Covid-19 pandemic. The group lost S$732 million in the fourth quarter alone, a reversal from the S$203 million it earned in the same period last year.

As global travel came to a virtual halt, the drop in passenger traffic led to a S$894 million fall in group revenue, a 22 per cent decline from the same period last year. Full-year revenue came in at S$15.98 billion, down from S$16.32 billion a year earlier.

In a news release, SIA said it had put in a strong performance in the first nine months of the financial year, driven by “robust passenger traffic numbers and the extensive initiatives undertaken as part of its transformation programme”.

The group operates SIA, SilkAir and Scoot airlines.

But with market conditions deteriorating abruptly in February 2020 amid the global outbreak, the company said fears about the spread of the virus, as well as global travel restrictions and border controls, led to a collapse in the demand for air travel during the final quarter.

In addition, a slump in the demand for oil owing to an unexpected price war and supply glut also led to “fuel hedging losses” on contracts that had matured during the quarter.

Airlines routinely lock in fuel prices in advance so they can manage costs. However, the dramatic fall in the price of crude oil, and therefore aviation fuel, means SIA would be paying more than the current market rate as a result of its hedging strategy.

Amid the Covid-19 pandemic, the company had to slash scheduled passenger capacity by 96 per cent from April to June 2020.

This cut in services to a tiny fraction of those in normal times will also lead to lower fuel consumption in the current financial year than previously anticipated. As a result, the company recorded a “substantial mark-to-market” loss of S$710 million due to its over-hedged position.

The group said an “in-depth review” of all aspects of operations is underway to enable it to emerge stronger when air travel recovers. The review includes “modifications to its inflight products and end-to-end service delivery to provide additional health and safety assurances to our customers and our crew”, it added.

The group has previously cut the pay of its management and implemented voluntary and compulsory no-pay leave schemes, as well as a shorter work month for all ground staff. Non-essential projects are deferred, and the group has also tightened controls on discretionary spending.

Its board of directors also volunteered to reduce their fees.

“Even as we scaled back operations due to the border closures, the group persisted with services to key cities for as long as possible to bring many of our customers home, including Singaporean students who were studying overseas.

“We are also seeking to retain our talented and highly trained staff through this crisis. Their expertise and dedication will be crucial when the recovery comes,” said SIA.

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