The Singapore Airlines Group expects a “material” quarterly operating loss from the “severe impact” of the coronavirus outbreak, as it seeks to readjust aircraft deliveries and defer payments to its suppliers.
However, it will still be in the black for the full financial year ended 31 March, thanks to “the benefit of the strong results” for the first nine months. The group will be releasing its full-year results on 14 May.
It disclosed in a trading update that the pandemic’s impact on air travel has hit its carriers badly and is “exacerbated by the lack of a domestic market for it to fall back upon”.
It adds that the collapse of fuel prices in March, coupled with the “unprecedented” capacity cuts, has led to fuel hedging losses and the group’s carriers being over-hedged for the new financial year.
“Accordingly, the SIA Group expects to report a material operating loss for the final quarter of FY2019/2020. With the benefit of the strong results for the first nine months of the financial year, the SIA Group expects to report a small operating profit, but a net loss, for [the full year],” the group states.
SIA and SilkAir have already extended their combined capacity cuts — of around 96% of their network — to the end of June, while low-cost arm Scoot has slashed 98% of its capacity.
Meanwhile, the group says that it is negotiating aircraft deliveries, “in view of the prevailing market conditions”. Cirium fleets data indicates SIA has 68 aircraft on order, comprising 19 Airbus A350-900s, 29 Boeing 787-10s and 20 777-9s. SilkAir has 31 737 Max 8s on order, while Scoot has 51 aircraft on order, comprising 46 A320neo family aircraft and five 787s.
“We are in negotiations with aircraft manufacturers to adjust our delivery stream for existing aircraft orders, in view of prevailing market conditions, balancing that with our longer-term fleet renewal programme and we are talking with various suppliers to reschedule payments,” the group states without going into further detail.
Acknowledging that the post-pandemic recovery timeline remains uncertain, the group adds that it is actively shoring up liquidity, reducing costs and conserving cash.
In late March, SIA announced plans to issue S$5.3 billion ($3.75 billion) in equity and S$3.5 billion in 10-year mandatory convertible bonds, in a bid to raise liquidity. It later disclosed that it has set aside S$3.3 billion for aircraft purchases and aircraft related payments.