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SIA Group: Strong Q3 $659 Million Profit As Passengers Surge

SIA Group, which operates both luxury flagship carrier Singapore Airlines and low-cost airline Scoot, has posted strong third-quarter results, with a net profit of $659 million as passengers return close to pre-pandemic levels.

  • Robust passenger demand drives record quarterly revenue of $5,082 million
  • Record operating and net profits for nine months to December 2023.
  • Passenger yields are under pressure as global capacity restoration leads to heightened competition.
  • Geopolitical and macroeconomic concerns, inflationary pressures, and supply chain constraints challenge the airline industry.
Boeing 777-200 in Singapore Airlines livery.
Boeing 777-200 in Singapore Airlines livery. Image: Singapore Airlines

SIA Group Financial Performance Third Quarter FY2023/24 – Profit and Loss Table

The Singapore Airlines (SIA) Group’s financial performance for the third quarter of FY2023/24 is summarised in the table. Note 1: Based on cargo yield of 30.5 cents per load tonne-kilometre in FY2019/20. Note 2: The Group recorded a tax credit on previously unrecognized tax losses upon finalization of the Group’s tax position following the filing of YA2023 tax returns.

SIA Group Q3 Financial Performance Highlights

Surge in Air Travel Demand in North Asia

The aviation market is experiencing a significant growth trajectory, especially with the reopening of critical economies such as China, Hong Kong SAR, Japan, and Taiwan. This has catalyzed a swift rise in air travel demand across North Asia.

Passenger Growth Outpaces Capacity

The SIA Group’s passenger count, including carriers like SIA and Scoot, witnessed a remarkable 29.4% increase from the previous year as they ferried a commendable 9.5 million passengers. The growth in passenger traffic, at a rate of 19.1%, notably surpassed the capacity expansion of 17.9%.

Improvement in Passenger Load Factor

This surge in demand led to a slight enhancement in the passenger load factor, a critical industry measure of seat occupancy, which edged up by 0.8 percentage points, resting at 88.2%.

Breakthrough in Quarterly Revenue

A historic milestone was achieved with the SIA Group’s quarterly revenue exceeding the $5 billion mark for the first time. It stood at $5,082 million, marking a 4.9% ascent compared with the previous year’s figures.

Varied Trends in Sector Revenues

Passenger Revenue Climbs

The revenue from passengers showed a substantial rise, with an additional $398 million pouring in to reach $4,165 million, up by 10.6%. However, it’s important to note a downtick in passenger yields (the average fare paid per mile, per passenger), which fell by 7.4%.

Cargo Revenue Declines

Conversely, the revenue from cargo operations fell sharply by $303 million, a 35.1% decline, in alignment with a 37.4% reduction in cargo yields year-over-year. Despite this drop, cargo yields remained 32.1% above the pre-pandemic levels.

Expenditure on the Rise

The SIA Group’s total expenditures increased by 9.3% or $382 million, culminating in $4,473 million in costs. This was largely due to an upswing of $261 million (9.5%) in non-fuel expenses and an upsurge in net fuel costs by $121 million (9.1%).

Marginal Decline in Operating Profit

While revenue trends were generally positive, the operating profit for the quarter saw a dip of 19.3%, totaling $609 million when juxtaposed with the previous year.

Net Profit Shows Resilience

Contrarily, the Group’s net profit showed resilience, incrementing by 4.9% or $31 million, yielding a $659 million total. Factors contributing to this positive trend included lower tax expenses, profitable outcomes from associated businesses, gains from the disposal of assets, and improved net interest income.

Record-Breaking Nine-Month Performance

The Group’s financial performance was stellar over the nine months leading up to December 2023.

Group Revenue Hits New Peak

The group revenue experienced a robust 7.4% increase, translating to an additional $981 million and establishing a new record of $14,244 million. The major thrust behind this was a 20.2% surge in passenger-flown revenue, which compensated for a 45.3% decline in cargo-flown revenue.

Balanced Expenditure Growth

Expenditure paced alongside revenue, ascending by 7.2% or $808 million. The rise came from augmented non-fuel costs and a 22.0% decrease in net fuel expenses, slightly offset by greater fuel consumption and reduced fuel hedging gains.

Profits Reach Historical Heights

Record-breaking profits marked the period. The operating profit advanced by 8.7% or $174 million, reaching $2,163 million. The net profit climbed even more significantly, by 35.0% or $545 million, crossing the $2 billion mark for the first time, epitomizing the Group’s formidable fiscal stability.

SIA Group Balance Sheet

Group Shareholders’ Equity Declines, Debt-Equity Ratio Jumps in the Latest Financial Update

As the financial year closed on December 31, 2023, the Group’s shareholders’ equity saw a significant drop to $15.6 billion, a sharp decline of $4.3 billion since the end of March of the same year. This change came on the heels of the redemption process for the June 2021 Mandatory Convertible Bonds (MCBs), which cost the company a hefty $5.1 billion, including the accrued yield. After these redemptions, only a quarter of the originally issued MCBs from June 2021 remain to be paid off.

The total debt the Group owes has been reduced by $1.6 billion, landing at $13.7 billion. This improvement is primarily due to the Group’s strategic repayment of its loans. However, this repayment plan has impacted the debt-equity ratio, which has escalated from 0.77 to 0.88 times, indicating a tighter leverage position.

Regarding liquidity, the Group’s cash reserves and bank balances have contracted, dropping by $5.8 billion to $10.5 billion. The main factors at play here are the considerable amounts funneled into the MCB redemptions, loan repayments, and dividend payouts. Nevertheless, the blow has been softened somewhat by the $3.7 billion in net cash generated from the Group’s operational activities, including the income from forward sales.

Looking at available credit resources, the Group has maintained a solid backup with $2.8 billion in committed lines of credit. These financial reservoirs are preserved intact, providing a cushion of liquidity without current utilization.

Fleet And Network Development

As of December 31, 2023, the Group boasts an impressive operating fleet of 202 aircraft, both passenger and freight, with an average age of just seven years and a month.

During the third quarter, SIA upgraded its fleet by acquiring three Boeing 787-10s. This move increased its total to 143 passenger planes and seven freighters.

Scoot operates a fleet of 52 aircraft. The low-cost carrier will enhance its fleet by adding its first Embraer E190-E2 aircraft, scheduled for delivery in April 2024.

Moreover, the Group is preparing for substantial growth, with 92 new aircraft currently on order.

  • SIA’s 143 aircraft fleet comprised 23 777-300ERs, 12 A380s, 63 A350s, 22 787-10s, seven 737-800s, and 16 737-8s.
  • Scoot’s 52 aircraft fleet comprised 11 787-8s, ten 787-9s, 16 A320ceos, six A320neos, and nine A321neos.
  • Aircraft orders comprise 27 Airbus aircraft (two A350s, 12 A320neos, six A321neos, seven A350Fs), 56 Boeing aircraft (31 777-9s, 12 787s, 13 737-8s), and nine Embraer E190-E2 aircraft.

SIA Group Routes and Services

Singapore Airlines (SIA) has announced a significant expansion of its flight services, marking a robust recovery towards pre-pandemic operational levels.

Enhanced Network Footprint In China

During the recent third quarter, SIA has reinstated flights to Chongqing and Xiamen, enhancing its network footprint in China. In tandem, Scoot, SIA’s low-cost subsidiary, resumed flights to Kunming, asserting the Group’s growing presence in the region. Currently, the Group’s collective operation spans 23 destinations within China, showcasing a near return to the 25 destinations serviced before the global disruption.

  • SIA’s network includes seven prominent cities: Beijing, Chengdu, Chongqing, Guangzhou, Shanghai, Shenzhen, and Xiamen.
  • Scoot has cast a wider net with routes to 17 destinations, including Changsha, Fuzhou, Guangzhou, Haikou, Hangzhou, Jinan, Kunming, Nanchang, Nanjing, Nanning, Ningbo, Qingdao, Shenyang, Tianjin, Wuhan, Xi’an, and Zhengzhou.

Boosting Network For Northern Summer 2024

The strategic resumption of services extends beyond China, with Scoot revitalizing operations in Chennai. Additionally, the airline has strategically restructured its services to Europe by initiating Singapore-Athens-Berlin flights thrice weekly—a decision to streamline connectivity and enhance passenger convenience.

Looking ahead to the Northern Summer 2024 operating season, which spans from March 31 to October 26, 2024, there is a notable boost in service frequency. SIA plans to increase flights to Fukuoka and Nagoya, transitioning from five weekly flights to a daily service. The airline also intends to offer four weekly direct flights to Milan—an upgrade from the current biweekly schedule.

Furthermore, SIA is considering introducing a five-times-weekly direct flight route from Singapore to London Gatwick in June 2024. This plan is pending regulatory approval and is part of a broader initiative to return the Group’s capacity to pre-pandemic levels within the Fiscal Year 2024/25.

SIA’s strategic expansion is a testament to its resilience and commitment to providing exceptional service across its extensive network. As these plans unfold, the airline looks forward to serving its passengers with expanded options and greater flexibility, reinstating its position as a leader in global aviation.

SIA Group Strategic Initiatives

Air India’s merger with Vistara is moving forward, subject to approval from foreign direct investment and other regulatory bodies. Completing this deal will grant Singapore Airlines (SIA) a substantial 25.1% ownership of the expanded Air India Group. This merger is poised to enhance SIA’s foothold in India’s aviation market segments. It will fortify SIA’s multi-hub strategy and support its ongoing participation in India’s burgeoning aviation sector.

In a significant step towards sustainability, SIA and Scoot unveiled their goal in November 2023 to switch 5% of their total fuel usage to sustainable aviation fuels by 2030. This initiative marks a pivotal achievement in the Group’s sustainability efforts, underscoring their pledge to attain net-zero carbon emissions by the year 2050.

SIA Group Outlook

Air travel demand is thriving into the last quarter of 2023 and the outset of 2024. Strong forward sales signal sustained strength. This is thanks to leisure travel peaks during school holidays and Easter in March and April 2024. Most markets show a rising capacity that matches this demand.

Competition is driving down passenger yields. The whole aviation industry is restoring capacity. Yet, potential challenges loom. Geopolitical tensions and economic uncertainty may impact business travel negatively. Rising fuel costs, inflation, and supply chain issues could make operating more expensive for airlines worldwide.

In the usually slower January to March quarter, air freight volume will likely drop. Yields could face more pressure as more passenger planes offer belly hold space for cargo.

The SIA Group plans to tackle these challenges head-on. The group’s strategy hinges on flexibility with the capacity to meet fluctuating demand, remaining vigilant for revenue and growth chances. Cost discipline remains vital. The Group benefits from two top-tier airline brands. This dual branding gives it a strategic way to serve different markets effectively. It offers customers greater choice and better value.

Investments in the Group’s network continue. SIA Group airlines are also enhancing their products and services. By embracing digital technologies, they aim to boost revenues. They are also streamlining their operations to be more efficient and productive.

Singapore Airlines Group: A Legacy of Aviation Excellence and Global Recognition

Since its inception in 1947 with Malayan Airways’ inaugural flight, Singapore Airlines (SIA) Group has claimed a rich heritage in aviation. What began as Malaysian Airways transformed into Malaysia-Singapore Airlines (MSA) before splitting in 1972. This pivotal split gave rise to Singapore Airlines and the Malaysian Airline System. SIA, starting with a fleet of only ten aircraft serving 22 destinations across 18 countries, has ascended to the ranks of a premier international airline group. The company prides itself on consistently advancing its brand pillars: unwavering service excellence, innovative product leadership, and extensive network connectivity.

Renowned as the most decorated airline worldwide, SIA continues its streak of garnering prestigious accolades. In 2024, Fortune Magazine honored SIA by listing it among the 50 most admired companies globally, distinguishing it as the sole representative from Singapore. Earlier in February 2023, SIA earned the ‘Airline of the Year’ title at the Air Transport World Airline Industry Awards, acknowledging its exceptional performance, innovation, and unmatched service standards in the airline sector. Adding to its achievements, in June 2023, SIA clinched the ‘World’s Best Airline’ title for the fifth time at the Skytrax World Airline Awards.

For further information on their award-winning services and offerings, visit www.singaporeair.com.

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