Singapore Airlines expects operating loss for Q1
Singapore Airlines (SIA) expects an operating loss for the first quarter of its financial year, noting that it carried 13,900 passengers last month, down from nearly 1.9 million in the same period last year.
It said group passenger capacity plunged 95.1 per cent year on year last month, though this was a marginal improvement over the 96.2 per cent decline seen in May. Group passenger capacity is measured in available seat kilometres.
SIA itself clocked a 94 per cent decline in capacity last month over the same month last year with only a "skeletal network" in operation, connecting Singapore to 24 cities.
Its subsidiaries fared worse. Budget carrier Scoot registered a 97.5 per cent cut in capacity, while regional airline SilkAir's capacity shrank by 99.3 per cent.
"Our view is that the recovery trajectory will be slower than initially projected, and will have a material impact on our revenue generation capability in the (2020 to 2021 financial year)," SIA said.
The group noted that industry experts, including the International Air Travel Association and International Civil Aviation Organisation, forecast that it will take two to four years before passenger traffic numbers return to pre-pandemic levels.
While Singapore and selected cities in China have established a green travel lane, SIA said the global lifting of border controls has been slower than expected.
In addition, lower oil prices are expected to hit profits for the first quarter, which ended on June 30. This is because the lower capacity projection has reduced expected fuel consumption, causing more fuel hedges to be deemed ineffective under financial reporting standards.
These hedges consequently need to be marked to market. With jet fuel prices remaining relatively low, marked-to-market losses are expected to be recorded.
"Accordingly, the SIA group expects to report a material operating loss for the first quarter," SIA said. - THE STRAITS TIMES