Singapore Airlines’ MRO unit has warned that the pace of recovery from the coronavirus downturn is “unclear” but will be slow, with base, engine and component maintenance likely to be impacted in coming months.
Releasing annual results for the year ending 31 March, SIA Engineering (SIAEC) says its line maintenance business was hardest hit by widespread airline cancellations and travel restrictions in the first few months of 2020.
The MRO provider calls March particularly tough. Owing to travel restrictions and flight cancellations, line maintenance work at its main Singapore base was half its usual workload.
SIAEC’s revenue from fleet management, which is based on flying hours, was “similarly impacted”, it adds.
Base maintenance, as well as engine and component segments, were “not immediately affected” during the last quarter of the financial year, but SIAEC expects financial impact in the coming months.
The MRO posted a full-year operating profit of S$67.7 million ($47.9 million), a 19% year-on-year increase reflecting strong financial performance in the first nine months of the financial year, SIAEC says.
Revenue for the year dipped a marginal 2.6% to S$994 million. Expenses fell 3.9% to S$926 million due partly to reduced staff and material costs.
Net profit increased 20.5% to S$194 million.
SIAEC ended the financial year with about S$520 million in cash and cash equivalents, slightly less than the S$522 it had one year earlier.
The coronavirus outbreak squeezed SIAEC in the quarter ending 31 March, with operating profit down 26% year-on-year to S$14.3 million.
Quarterly revenue fell 10% to S$229 million due mostly to less line- and airframe-maintenance work, while expenses sank 9.1% to S$215 million.
Net profit for the period rose nearly 6% to S$52.2 million.
The MRO says the pace of recovery is unclear “but is expected to be slow”. Recovery will depend on how soon traffic returns, especially to its main base at Singapore’s Changi Airport.
“While regulated mandatory aircraft checks are still ongoing, the reduction in flying hours and subsequent extended maintenance intervals will have an impact, albeit delayed, on our base maintenance unit and our [engine and component] joint ventures,” SIAEC adds.
It stressed that its balance sheet remains healthy, with a strong cash position and minimal debt.
SIAEC adds it will continue working on its “transformation journey” to increase productivity and cut costs, and will review investments.