Singapore Airlines posts first annual net loss in 48-year history after COVID-19 cripples demand
SINGAPORE: National carrier Singapore Airlines on Thursday (May 14) reported the first annual net loss in its 48-year history after COVID-19 crippled travel demand, saying that it has set up an internal task force to review its operations and to prepare for when air travel recovers.
In a filing to the Singapore Exchange, SIA Group reported a net loss of S$212 million for the 12 months ending Mar 31, a reversal from the S$683 million profit in the previous year.
It lost S$732 million in January to March this year. In comparison, it made S$203 million net profit in the same period last year.
Operating profit for the year came in at S$59 million, down 94.5 per cent from S$1 billion the previous year.
SIA said that it had entered the fourth quarter on the back of a strong performance in its first nine months, after robust passenger traffic and extensive initiatives undertaken as part of its transformation programme.
Then COVID-19 hit, and fears about the spread of the virus brought global travel to a standstill.
The steep drop in passenger traffic in the fourth quarter resulted in a S$894 million plunge in revenue, a decline of 22 per cent from the same period last year.
This dragged down group revenue for the year to S$16.98 billion, down 2.1 per cent from the previous financial year. The board did not propose a final dividend.
"The prospects for a recovery in international air travel in the months ahead depend upon when border controls and travel restrictions ease," said SIA.
"There is no visibility on the timing or trajectory of the recovery at this point, however, as there are few signs of an abatement in the COVID-19 pandemic," it added.
SIA flagged on 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.
The airline said last week that 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 outbreak. Additional fuel hedging losses are expected in that quarter, it said.
The ongoing COVID-19 pandemic has hit the aviation sector hard, as countries tighten borders and enforce lockdowns.
The International Air Transport Association (IATA) has warned that the outbreak could cost passenger airlines up to US$113 billion (S$162.7 billion) in lost revenue this year.
SIA and regional arm SilkAir have cut 96 per cent of its capacity to the end of June, while its budget arm Scoot has cut 98 per cent.
The group is also in negotiations with aircraft manufacturers to adjust its delivery stream for existing aircraft orders and are talking with various suppliers to reschedule payments.
In March, SIA group’s carriers posted a 60.4 per cent decline in passenger carriage.
SIA said on Thursday that annual passenger flown revenue for the year was 1.2 per cent lower than last year, as the improvement of S$753 million achieved in the first nine months of the financial year was wiped out by declines (-S$906 million) in the final quarter.
Cargo flown revenue was also 12.1 per cent weaker, largely on account of poorer performance between April and December 2019 due to the effect of international trade tensions and an export manufacturing slowdown in key economies.
Operating profit for the parent airline fell 70.3 per cent to S$294 million for the year, while SilkAir and Scoot posted an operating loss of S$112 million and S$198 million respectively.
SIA Engineering posted an operating profit of S$68 million for the full year, up 19.3 per cent from the previous year.
In the fourth quarter alone, net losses for the parent airline was S$583 million, S$100 million for SilkAir and S$125 million for Scoot.
With the aviation industry under severe turbulence, SIA announced a slew of cost-cutting measures in March, including wage cuts for its management team and compulsory no-pay leave for employees.
Grounded cabin crew are now helping out in hospitals and as safe distancing ambassadors in trains, markets and malls.
SIA has supported Singapore in its fight against COVID-19, including helping to fly in essential supplies and mounting evacuation flights to bring Singaporeans home.
"The group will maintain a minimum flight connectivity within its network during this period, while ensuring the flexibility to scale up capacity if there is an uptick in demand," it said on Thursday.
"In the meantime, the demand for essential goods such as medical supplies, pharmaceuticals and fresh foods still exceeds air freight capacity on many key lanes due to the sharp reduction in bellyhold capacity. This is expected to sustain cargo revenues for the near term.
"We will also continue to pursue charter opportunities, while closely monitoring for changes in demand."
The Government has said that it will “spare no effort” to help the national carrier see through this crisis.
“SIA has always flown Singapore’s flag high all over the world, and made us proud. We will spare no effort to enable it to do so again,” said Prime Minister Lee Hsien Loong in his May Day message.
READ: COVID-19: Safe distancing on aircraft and higher ticket prices could be 'new normal' for industry, say analysts
RETURN OF AIR TRAVEL
Analysts said that the recovery of Singapore’s aviation and tourism sectors in the wake of COVID-19 will be painfully slow, but that the market will fully recover eventually and Singapore could emerge as an even stronger hub over the long term due to strong government support.
The Government has set aside S$750 million of support for the aviation sector to help it recover more quickly from the blow dealt to it by COVID-19.
SIA in March said it had secured up to S$19 billion of funding to help see it through the coronavirus crisis and to expand afterward, in a sign of confidence that travel demand will eventually return.
It is also tapping existing investors for up to S$15 billion through the sale of shares and convertible bonds to offset the shock to its business.
The fundraising is being underwritten by the airline's biggest investor, Temasek Holdings, which owns about 55 per cent of the group.
In addition, it has arranged a S$4 billion bridge loan facility with DBS Bank to support the company's near-term liquidity requirements.
SIA has also implemented procedures to make sure it protects passengers and its crew members. It is now mandatory for all passengers on SIA and SilkAir flights to bring their own masks on board, and wear it throughout the flight.
Passengers will also have to observe safe distancing measures when embarking and disembarking, as well as when queuing to use the toilets.
This is in accordance with a directive by the Civil Aviation Authority of Singapore, said the airline.
Customers travelling to Singapore will have to undergo a basic health assessment before boarding, including a verbal health declaration and temperature checks.
Meal services will be suspended for flights within Southeast Asia and services to China. Passengers will be given a snack bag with water and refreshments when boarding instead.
All other flights will have meals provided.
READ: COVID-19: Mandatory for SIA, SilkAir and Scoot passengers to wear face masks on board, observe safe distancing
Those new measures are on top of existing precautionary measures, such as the suspension of hot towel service on board, and the removal of menu cards and seat back reading material such as magazines on all flights.
Cabin crew members and pilots will also have their temperatures taken before flights and will not report for work if they are unwell, said SIA. They will also wear masks and goggles or eye visors during flights.
Face masks are also mandatory for flights on Scoot, with passengers required to submit a health declaration form before checking in, and have their temperature taken.
All Scoot operating crew, who already undergo pre-flight temperature taking, must wear the appropriate PPE (Personal Protection Equipment) while on duty.
Cabin baggage will be limited to 3kg, down from the previous 10kg and 15kg in Economy and ScootPlus, respectively, for easier security clearance and boarding.
"We have set up an internal task force to review all aspects of our operations to ensure that we are ready to ramp up services when air travel recovers," said SIA on Thursday.
"This includes any modifications to our inflight products and end-to-end service delivery to provide additional health and safety assurances to our customers and our crew."