Singapore Airlines (SIA) has reported another record quarter with net profits surging 98.4 per cent from a year ago to hit SGD 734 million (USD 552 million) in Q1-2023. With strong passenger demand across most of its routes, it achieved a passenger load factor (PLF) of 88.9 per cent for the quarter, which is also a record.
In its business update which was released together with the financial results, Singapore’s flag carrier also revealed plans to expand its network including adding more flights to and from Indian cities.
The airline, which prides itself as being the “most awarded airline in the world” laid claim to another accolade as it was recently named Skytrax’s best airline in the world for 2023. The Skytrax award is widely considered as the “Oscars” of the aviation industry. The last time it was recognised as the best airline in the world was in 2018.
For the first quarter which ended in June 2023, SIA recorded total revenue of SGD 4,479 million (USD 3,368 million), a rise of SGD 551 million or 14 per cent compared with the same quarter last year. Passenger flown revenue grew 37.4 per cent to SGD 1,001 million but cargo revenue declined 50.6 per cent or SGD 555 million due to softer demand amid higher cargo capacity in the market.
As flights and passengers increased, expenses swelled by 10.5 per cent or SGD 353 million (USD 265 million) year-on-year to SGD 3,725 million. Non-fuel expenditure increased by 27.3 per cent partially offset by net fuel cost which was lower by 17.3 per cent or SGD 220 million. Net fuel cost fell to SGD 1,053 million as a result of declining fuel prices saving the airline SGD 599 million (33.4 per cent).
The SIA Group posted an operating profit of SGD 755 million (USD 568 million), or SGD 199 million (35.8 per cent) better than the SGD 556 million operating profit it achieved for the comparable period last year. The largest contributor to the record profit was full-service carrier SIA which notched up a record profit of SGD 738 million (up SGD113 million) whereas low-cost carrier Scoot attained an operating profit of SGD 24 million, an increase of SGD 76 million from a year earlier.
The airline attributed the better operating performance, an improvement of SGD 199 million (USD 150 million), to “a net interest income versus a net finance charge last year ( SGD 144 million), and a share of profits versus a share of losses of associated companies last year ( SGD 81 million), and partially offset by this year’s higher tax expense (-SGD 62 million).”
The airline said that it saw robust demand for air travel through the mid-year Singapore school holidays and the start of the summer travel season as passenger capacity expanded by 32.4 per cent year-on-year as restrictions on international air travel eased globally. Its two wholly owned brands, SIA and Scoot carried 8.4 million passengers during Q1-2023, which was “65.5 per cent higher than a year before, with strong demand across all route regions and market segments. Passenger traffic and load factors improved across all markets, with the year-on-year traffic growth of 49 per cent outpacing the capacity expansion.”
As of June 30, 2023, the Group’s passenger network covered 116 destinations in 36 countries and territories. Main carrier SIA served 74 destinations while Scoot served 65 destinations.
It expects its capacity to reach 90 per cent of pre-Covid levels by March 2024.
During the reporting quarter low-cost carrier Scoot expanded its footprint in China to 17 cities with the resumption of services to seven destinations namely Changsha, Haikou, Nanning, Ningbo, Shenyang, Wuhan, and Xi’an. With these additions, SIA and Scoot collectively serve 17 destinations in China, with Scoot serving 14 and SIA serving four.
From October 29 this year, the SIA Group plans to increase its services between Singapore and Chennai from 17 times weekly to 21 times weekly, with Scoot commencing daily operations to the city after SIA transfers some of its Chennai services to the low-cost carrier from November 5, 2023. In addition, SIA will progressively increase its weekly service between Singapore and Hyderabad from seven times weekly to 12 times weekly, taking over Scoot’s daily services between the two cities. As part of this move, SIA will also offer daily morning and evening services to Bengaluru.
The airlines said that these adjustments and flight additions are subject to regulatory approval.
SIA explained that “these adjustments are part of the continuous review of the SIA Group’s network and reflect its ability and flexibility to adjust operations between SIA and Scoot to meet evolving customer demand.”
SIA’s outstanding results since the pandemic are due to farsighted planning as to the magnanimity of its shareholders (the main one being state investment firm Temasek Holdings) and its financial institutions. It managed to raise almost USD 17 billion during Covid and as a result, held on to most of its staff and aircraft. Most of its regional competitors had to lay off staff and return leased aircraft as well as sell their planes to stave off bankruptcy.
As of June 30 this year, SIA still holds a cash balance of SGD 13.8 billion (USD 10.4 billion).
The coming 12 months will be more challenging for the Singapore airline, as “revenge” travel diminishes, and its regional and global competitors restore flights to pre-Covid levels.
In its statement released alongside the financial numbers, SIA cautioned that “macroeconomic and geopolitical uncertainties, as well as inflation, could pose challenges for the airline industry,” as it “continues to cautiously navigate geopolitical and macroeconomic uncertainties, as well as increasing competition across key markets.”
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