Singapore Airlines first major Asian Carrier to report post-COVID quarterly profit

By Lee Kah Whye
Singapore, February 28 : Last week, Singapore Airlines (SIA), co-owner of Gurgaon-based Vistara Airline, reported a quarterly profit for the first time since the COVID-19 pandemic started.
The carrier recorded a net profit of SGD 85 million (USD 62.8 million) for the third financial quarter which ended in December 2021. It attributed this to significant growth in passenger numbers due to pent-up demand for air travel during the year-end holiday season as Singapore opened to travellers via the VTL (vaccinated travel lane) programme. Record cargo revenues driven by "robust demand and tight capacity which support loads and yields" was also a major contributory factor to the results.
With international air travel progressively recovering, the carrier continued the expansion of its network and grew the number of destinations it served. Leading this during the quarter was the restoration of services to 12 cities in India, including VTL services from Chennai, Delhi, and Mumbai, as well as the resumption of flights to several points in Southeast Asia.
Singapore's VTL scheme allows vaccinated travellers from selected countries including India, the United States, United Kingdom and some European and Asian countries, quarantine-free entry into the country. Visitors however need to test negative on a pre-departure professionally administered PCR (polymerase chain reaction) test or an ART (antigen rapid test) as well as a supervised antigen self-test after arrival. Some 28 countries are covered by the VTL scheme, and this will go up to 30 when Israel and the Philippines are added from March 4.
However, it should be noted that Singapore's VTL is unilateral. This means foreign visitors will still have to adhere to their countries' COVID-19 entry rules when returning home.
SIA said in its Financial Year 2021-22 third-quarter business update that the two airlines in its group, including low-cost carrier Scoot, carried 1.1 million passengers during the quarter, more than five times the number from the previous year and double that of the second quarter of FY2021-22. Passenger capacity (measured in available seat-kilometres) grew 183.8 per cent year-on-year, as it ramped up flights in response to demand created by the VTL. By the end of the quarter, passenger capacity reached 45 per cent of pre-COVID levels.
Revenue rose over 117 per cent to SGD1,249 million (USD 925 million) compared with the same quarter last year to SGD 2,316 million, with substantial improvements in both passenger and cargo revenues.
Passenger flown revenue increased by SGD 650 million to SGD 833 million, an increase of 355.2 per cent on the back of a 556.8 per cent growth in traffic (measured by revenue-passenger kilometres) that outpaced capacity expansion, resulting in the passenger load factor rising 18.9 percentage points to 33.2 per cent.
Cargo flown revenue rose to SGD1,351 million, an increase of SGD 607 million or 81.6 per cent and in the process set a new quarterly record by surpassing the SGD 1 billion mark for the first time ever. The airlines credited this to "robust demand during the traditional cargo peak period buoyed by retail inventory restocking and strong e-commerce traffic." Cargo yields rose by 26.9 per cent due to an ongoing industry capacity crunch.
In a sign that SIA expects the higher cargo volume to be a long-term trend, it signed a letter of intent in December 2021 with Airbus to convert some of its Airbus plane orders to freighters. If confirmed, SIA will take delivery of seven Airbus A350 freighters in the fourth quarter of 2025 and will have the option to buy another five. These freighters will replace its fleet of seven ageing Boeing 747 freighters as well as help it save cost and reduce carbon emissions since they are 40 per cent more fuel-efficient.
For the first nine months of the current financial year up to December 2021, SIA narrowed its operating loss by SGD 1,651 or 75.3 per cent to SGD 543 million. Revenue grew SGD 2,442 million to SGD 5,143 million, an increase of 90.4 per cent from significant passenger and cargo flown revenue improvements.
As a result of the stronger performance for the third quarter, the airline recorded an operating cash surplus of SGD 322 million for the first nine months of the year. This reversed the operating cash burn that it had been experiencing since the start of the pandemic.
As at the end of December, SIA's network covered a total of 85 destinations, 5 up from the previous quarter with the full-service carrier serving 63 destinations and low-cost subsidiary serving 35. Its cargo network comprised 95 destinations, up from 78 in the prior quarter.
With the recovery in air travel, the airline expects to continue to add destinations and increase flight frequency in the coming months and serve 70 per cent of its pre-COVID destinations by the end of the current financial year. The plan is to take passenger capacity up to 51 per cent by March 2022, reaching an average capacity of 47 per cent of pre-COVID levels.
Although the airline believes demand should continue to recover, especially on VTL services, it says that passenger traffic is likely to moderate in the fourth quarter after the end of the year-end holiday season. It also expects air cargo demand to ease in the January to March quarter with the traditional slowdown in exports during the Lunar New Year holiday period. However, it predicts that both sea and air freight capacities are expected to continue to support loads and yields.
"Singapore's VTL arrangements have been a game-changer for the SIA Group, facilitating quarantine free mass travel for the first time since the pandemic began," SIA said in its press statement on February 24. Although it noted that several key markets have further relaxed testing requirements for incoming passengers, challenges remain. "The Group will remain nimble and proactive in adjusting its capacity and network, in tandem with the prevailing market conditions and regulations."