With the surge in passenger demand, the SIA Group has reported an unprecedented quarterly net profit of $734 million.
- This record-breaking performance is primarily driven by the continued strength in travel demand, resulting in peak load factors.
- The near-term outlook remains positive as passenger bookings continue to show robust trends.
- However, the softening demand and increased capacity in the cargo sector have led to a decline in cargo revenue.
- Undeterred, the group continues to invest in strategic initiatives and industry-leading products and services.
- Despite geopolitical and macroeconomic uncertainties and intensifying competition in key markets, the Group continues to navigate cautiously.
Let’s delve into the SIA Group’s financial performance for the first quarter of FY2023/24.
SIA Group: Highest Quarterly Performance in Group’s History
In a landmark achievement, the SIA Group reported a net profit of $734 million in the initial three months of the fiscal year 2023/24. This figure represents the highest quarterly performance in the Group’s history. The surge in profitability is primarily attributed to the strong demand for air travel during the mid-year school holidays and the onset of the summer travel season.
With international travel restrictions easing worldwide, the Group’s passenger capacity witnessed a year-on-year growth of 32.4%. SIA and Scoot, during the quarter, transported 8.4 million passengers, marking a substantial increase of 65.5% compared to the same period last year.
This growth, evident across all route regions and market segments, led to passenger traffic and load factors improvements across all markets. The year-on-year traffic growth of 49.0% even surpassed the capacity expansion. The Group set a new high with a record quarterly passenger load factor (PLF) of 88.9%, while SIA and Scoot achieved record PLFs of 88.1% and 91.7%, respectively.
SIA Group Cargo Performance
In a year-on-year comparison, the performance of the cargo segment experienced a downturn due to the continuing softening of air freight demand. A decrease in cargo loads by 11.3% was observed, while capacity experienced growth of 12.1%. This growth was primarily driven by the increase in bellyhold capacity due to more passenger flights’ resumption. Consequently, the cargo load factor dropped by 13.7 percentage points to 51.8%, and cargo yields saw a reduction of 44.3% compared to the previous year. However, it is noteworthy that the cargo yields, at 44.6 cents per load tonne-kilometer, still remained 50% above the pre-Covid level of 29.7 cents per load tonne-kilometer (as measured in the first quarter of FY2019/20).
SIA Group Revenue Increase
Despite these challenges, the Group’s revenue showed an upward trend with an increase of $551 million (+14.0%) year-on-year, reaching $4,479 million. This growth was fueled by the higher passenger flown revenue of $1,001 million (+37.4%), although it was partially offset by a decrease in cargo flown revenue of $555 million (-50.6%).
On the expenditure front, there was an increase of $353 million (+10.5%) year-on-year, totaling $3,725 million. This was attributed to the rise in non-fuel expenditure of $572 million (+27.3%), which was partially counterbalanced by a reduction in net fuel cost by $220 million (-17.3%). The net fuel cost fell to $1,053 million, largely due to a 33.4% decrease in fuel prices (-$599 million). This happened despite the increased volumes uplifted (+$305 million) and lower fuel hedging gains (+$101 million). The 27.3% surge in non-fuel expenditure aligned with the 32.4% increase in passenger capacity.
Singapore Airlines Q2: Group Operating Profits Soar
With an impressive surge of 35.8%, the Group’s operating profit soared to $755 million, marking an increase of $199 million from the previous year’s $556 million. Singapore Airlines (SIA) outperformed itself, churning a record-breaking operating profit of $738 million, a notable advancement of $113 million. Meanwhile, Scoot, the low-cost airline, also exhibited a robust performance, with its operating profit escalating to $24 million – a whopping $76 million upswing from the preceding year.
The quarterly net profit of the Group witnessed a staggering ascent of 98.4%, reaching $734 million – a leap of $364 million from last year. This remarkable achievement can largely be attributed to the superior operating performance that added $199 million, the transformation of a net finance charge to a net interest income adding $144 million, and the switch from a share of losses to a share of profits from associated companies, which contributed an additional $81 million. However, it is important to mention that this year’s higher tax expense did offset these gains to some extent, causing a deduction of $62 million.
Singapore Airlines Group Q2 FY2023/24 Balance Sheet
As of the conclusion of Q2 FY2023/24 on 30 June 2023, a stark decrease in the Group shareholders’ equity is observed, sliding from $17.2 billion to $14.5 billion. This $2.7 billion decline is primarily attributed to the redemption of $3.4 billion worth of Mandatory Convertible Bonds (MCBs) that were initially issued in June 2021. Concurrently, the Group’s cash and bank balances dipped by $2.5 billion, landing at a total of $13.8 billion. This reduction in cash reserves was partially offset by the net cash inflow from operations, amounting to $1.6 billion, including proceeds from forward sales.
With the Group’s total debt balances maintaining a steady figure of $14.7 billion, there has been a marginal increase in the Group’s debt-equity ratio – from 0.77 times to 0.86 times. Despite this, the Group continues to have access to $2.2 billion in committed lines of credit, all of which remain untouched. Despite these fluctuations, the Group’s balance sheet remains robust and continues to be one of the most solid within the sector.
SIA Group Fleet Expansion
In a strategic move to enhance its operational capacity, Singapore Airlines (SIA) incorporated an additional four aircraft into its operational fleet during the first quarter. The new additions include an Airbus A350-900 (delivered in March 2023), two Boeing 787-10s (delivered in April and June 2023), and a 737-8 (delivered in February 2022), which underwent a cabin retrofit prior to induction.
As of the end of the second quarter on 30 June 2023, the Group’s operational fleet has grown to 199 aircraft. The fleet comprises 192 passenger aircraft and seven freighters under SIA’s direct operation—137 passenger aircraft (1) and seven freighters. The low-cost wing, Scoot, operates an additional 55-passenger aircraft(2). The Group also has 99 aircraft(3) lined up in its order book for future delivery.
Maintaining an average age of just six years and 11 months, the Group’s fleet ranks among the youngest(4) and most fuel-efficient in the entire airline industry. This strategic choice not only allows the Group to provide superior comfort and innovative products to its customers but also enhances operational efficiency and bolsters ongoing efforts to reduce carbon emissions.
- Note 1: SIA’s 137-passenger aircraft fleet comprised 23 777-300ERs, 12 A380s, 62 A350s, 17 787-10s, seven 737-800s, and 16 737- 8s.
- Note 2: Scoot’s 55-passenger aircraft fleet comprised 10 787-8s, 10 787-9s, 20 A320ceos, six A320neos, and nine A321neos.
- Note 3: This comprises 28 Airbus aircraft (three A350s, 12 A320neos, six A321neos, seven A350Fs), 62 Boeing aircraft (31 777-9s, 18 787s, 13 737-8s), and nine Embraer E190-E2 aircraft.
- Note 4: The industry average fleet age as of July 2023 is around 15 years, according to CAPA data
SIA Group Expanding Network Reach
In an assertive move during the first quarter, Scoot extended its reach in the Chinese market by restarting services to seven key cities: Changsha, Haikou, Nanning, Ningbo, Shenyang, Wuhan, and Xi’an. Consequently, the collective presence of SIA and Scoot in China now encompasses 17 destinations, with Scoot catering to 14 localities and SIA to four.
As the financial year progressed to 30 June 2023, the Group’s passenger network(5) significantly grew to cover an impressive 116 destinations across 36 countries and territories; SIA was responsible for 74 of these destinations, while Scoot accounted for 65.
The cargo network(5) also expanded its reach to 121 destinations in 38 countries and territories, indicating a robust growth trajectory.
- Note 5: Number of destinations and countries and territories include Singapore.
SIA Group: Significant Route Recovery
Beginning 28 August 2023, Singapore Airlines (SIA) is set to reinstate its four-times-weekly service to Busan, marking a significant step in its route recovery. The Northern Winter operating season, spanning from 29 October 2023 to 30 March 2024, will witness a surge in SIA’s flight frequencies to key destinations in Hong Kong SAR, Japan (Fukuoka, Haneda, Nagoya, and Osaka), and Thailand (Bangkok and Phuket). This strategic move directly responds to the robust demand anticipated during the year-end peak travel season. Furthermore, from 22 November 2023, supplementary services will be provided to Adelaide, Brisbane, Christchurch, Melbourne, Perth, and Sydney. From 31 January 2024, SIA will bolster its service to Frankfurt with additional frequencies, continuing until the close of the Northern Winter operating season.
Meanwhile, Scoot, SIA’s low-cost subsidiary, has steadily reinstated its operations. July 2023 saw the resumption of flights to Jinan and Shenzhen in China, followed by the introduction of services to Nanchang from August 2023. In a bid to further strengthen its network, Scoot will augment its frequencies to Chiang Mai, Davao, and Jeddah from 29 October 2023. The low-cost carrier is also poised to restructure its direct flights to Athens and Berlin, introducing a thrice-weekly Singapore-Athens-Berlin service during the Northern Winter season.
Following the necessary regulatory approvals, services will be restructured in Bengaluru, Chennai, and Hyderabad by SIA and Scoot, effective October 29, 2023. The restructuring will include SIA providing daily morning and evening services to Bengaluru and an increase in the frequency of services from Singapore to Chennai from 17 times a week to 21. Scoot will begin daily operations to Chennai after transferring some of SIA’s services to the budget airline, starting from November 5, 2023.
Further adjustments include a gradual increase in SIA’s weekly service between Singapore and Hyderabad, from seven times weekly to twelve. This change will involve SIA taking over Scoot’s daily services between the two locations.
The aforementioned adjustments are a result of the SIA Group’s ongoing network review. It showcases the Group’s capacity and agility to adapt operations between SIA and Scoot in response to shifting customer demands.
Despite these changes, the SIA Group is steadfast in its goal to regain its pre-Covid6 capacity levels, aiming to reach approximately 90% by March 2024.
SIA Strategic Growth
Efforts are underway towards the proposed amalgamation of Air India and Vistara, a strategic move that would see Singapore Airlines (SIA) acquiring a 25.1% share in the expanded Air India Group once the transaction is finalized. This significant stake acquisition is anticipated to fortify the Group’s foothold in the Indian market, bolster its multi-hub strategy, and facilitate its continued direct involvement in this rapidly expanding aviation sector.
In line with its strategic growth plan, the Group is actively seeking commercial alliances with synergistic partners. A notable development in May 2023 was the agreement between Garuda Indonesia and SIA on a prospective route joint venture arrangement aimed at enhancing the collaboration between the two airlines. This proposed route joint venture, pending regulatory approvals, would potentially enable schedule coordination between Singapore and Indonesia, and pave the way for innovative initiatives such as combined fare products and mutual participation in frequent flyer programs.
Note 6: Pre-Covid refers to January 2020, before the onset of the Covid-19 pandemic.
SIA Improving the Passenger Experience with Free Wi-Fi Service
With a relentless commitment to customer satisfaction, Singapore Airlines (SIA) consistently refines its offerings. Making a remarkable move in February 2023, SIA emerged as the pioneer in providing complimentary unlimited in-flight Wi-Fi to all its Business Class customers, PPS Club members, and PPS Club supplementary card holders. Additionally, KrisFlyer members received free three-hour and two-hour Wi-Fi plans when traveling in Premium Economy Class and Economy Class, respectively.
From 1 July 2023, the benefits for KrisFlyer members traveling in Premium Economy Class and Economy Class were further amplified with the introduction of complimentary unlimited in-flight Wi-Fi. This augmented Wi-Fi service is operative in 95% of SIA’s aircraft fleet7 and spans almost the entire SIA route network. Through this expansive free unlimited Wi-Fi access, SIA’s customers enjoy an unparalleled internet connectivity experience in the airline industry.
In recognition of its exceptional service and quality, SIA was once again honoured as the World’s Best Airline at the Skytrax World Airline Awards 2023, marking the fifth instance of this prestigious achievement. SIA also outshone in four categories, including Best First Class Airline, Best First Class Comfort Amenities, and Best Airline in Asia.
Additionally, SIA’s low-cost subsidiary, Scoot, made its mark at the Skytrax awards as the Best Long Haul Low-cost Airline and secured the second position in the World’s Best Low-cost Airlines category.
Note 7: Free unlimited Wi-Fi services are available on all aircraft except for the seven Boeing 737-800s that are not Wi-Fi enabled.
SIA’s Projected Outlook
As we venture into summer’s peak, the desire for air travel is projected to remain strong across all route regions. Notably, forward passenger bookings are tracking closely with the expansion of capacity in most markets over the forthcoming three months. Within this operational landscape, the SIA Group stands strongly, despite the anticipation of a competitive surge as more capacity is injected into global routes. The Group’s strategy will be to closely observe these trends and make necessary adjustments to its capacity and network.
Conversely, the cargo demand landscape appears to be less promising in the near term, influenced by inflation and sluggish economic conditions. The global increase of bellyhold capacity is expected to continue, as more airlines introduce passenger services. Concurrently, the easing of supply chain constraints and inventory overhang has triggered a modal shift towards sea freight. This, coupled with the softening of cargo demand, could potentially lead to increased competition and exert downward pressure on cargo yields, particularly on main trade routes.
All pre-Covid-19 hedge positions, contracted at lower Brent prices, have matured as of the end of the first quarter of FY2023/24. Moving forward into the second quarter of FY2023/24 and beyond, remaining hedge positions are pegged at prices that align more closely with current market levels.
The airline industry faces potential threats from macroeconomic instabilities, geopolitical uncertainties, and inflation. However, the robustness of Singapore Airlines Group’s diversified portfolio and multi-hub strategies, coupled with its successful transformation initiatives, fortifies its position to weather such challenges. Moreover, it stands poised to seize future opportunities that arise.
About Singapore Airlines
Tracing its roots back to 1947, the Singapore Airlines (SIA) Group embarked on its journey with the inaugural flight of Malayan Airways. Subsequent rebranding saw it become Malaysian Airways and later Malaysia-Singapore Airlines (MSA). The split in 1972 led to the birth of Singapore Airlines and Malaysian Airline System. From a humble beginning with a fleet of 10 aircraft serving 22 destinations across 18 countries, SIA has evolved into an internationally acclaimed airline group. Its unwavering commitment to Service Excellence, Product Leadership, and Network Connectivity forms the cornerstone of its brand promise.
As the world’s most awarded airline, SIA’s accolades speak volumes about its exemplary performance. In 2023, it secured a spot in Fortune Magazine’s list of the 50 most admired companies globally, being the only Singapore-based brand and the top-ranked Asian company on the list. February 2023 saw SIA being conferred with the Airline of the Year title at the Air Transport World Airline Industry Awards, a testament to its innovative strides and superior service in the airline industry. Furthermore, SIA clinched the World’s Best Airline title for the fifth time at the 2023 Skytrax World Airline Awards. For additional information, please visit www.singaporeair.com.