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Singapore Airlines to report Q4 loss on fuel hedges

Singapore Airlines to report Q4 loss on fuel hedges

FILE PHOTO: Singapore Airlines planes pictured on the tarmac at Changi Airport. (Photo: Reuters/Edgar Su)

SINGAPORE: Singapore Airlines said on Friday (May 8) that it would report a material operating loss in the quarter ended Mar 31 partly because of a collapse in fuel prices that led to major hedging losses and that it would push back aircraft deliveries.

The airline said operating cashflows were expected to remain negative in the quarter ending on Jun 30 at a time when most of its fleet is grounded because of the coronavirus crisis. Additional fuel hedging losses are expected in that quarter, it said.

"Given the uncertainty in the market, we have taken a pause and plan to monitor developments closely before entering into any additional hedges," the airline said in a statement.

The airline said in February it had entered fuel hedging contracts to Mar 31, 2025. That includes hedging 51 per cent of its jet fuel at S$78 a barrel and 22 per cent of Brent at S$58 a barrel in the current financial year. Jet fuel is now below S$22 a barrel and Brent is below S$30 a barrel.

READ: Singapore Airlines, Qantas tie up with Australia to carry produce, seafood to Asian markets

Broker UOB Kay Hian in March said the airline faced S$2.5 billion in marked-to-market hedging losses by the end of that month.

The airline, which raised S$15 billion of funding underwritten by its biggest shareholder, state investor Temasek, is due to report its fourth-quarter results on May 14.

The airline said with the benefit of strong results for the first nine months, when it recorded a S$813.6 million operating profit, it expects to record a small operating profit but a net loss for the full year ended Mar 31.

Singapore Airlines and regional arm SilkAir have cut 96 per cent of capacity to the end of June, and low-cost arm Scoot has cut 98 per cent because of a lack of demand and travel restrictions associated with the coronavirus pandemic.

READ: SIA extends flight cancellations to June amid COVID-19 travel restrictions

"We are in negotiations with aircraft manufacturers to adjust our delivery stream for existing aircraft orders, in view of prevailing market conditions, balancing that with our longer term fleet renewal programme and we are talking with various suppliers to reschedule payments," the airline said.

The company also said it had written the equity value of its 20 per cent stake in Virgin Australia Holdings down to zero as of Dec 31 and had no further exposure to losses at the Australian carrier, which entered voluntary administration last month.

Singapore Airlines shares were 2.7 per cent higher in early trading on Friday.

Source: Reuters/lk


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