The Singapore Airlines Group has posted a first-quarter $1 billion loss from the impact of COVID-19 as a direct result of 99.5% fewer passengers flying on the groups Singapore, SilkAir and Scoot Airlines.
Entering the first financial quarter of 2020/21 (1 April – 30 June 2020) at a time when market conditions were deteriorating rapidly due to the spread of COVID-19 globally, the Group noted demand for air travel “evaporated as travel restrictions, and border controls were imposed around the world”.
Consequently, passenger carriage (measured in revenue passenger-kilometres) fell by 99.4% year-on-year for Singapore Airlines (SIA), 99.8% for SilkAir and 99.9% for Scoot, resulting in a 99.5% decline for the Group.
While there were some improvements in cargo flown revenue with strong demand for urgent movements of personal protective equipment, pharmaceuticals and fresh foods, consequently, overall the Group swung into an operating loss of $1,037 million for the quarter, a $1,237 million reversal from an operating profit of $200 million last year.
What next?
Singapore Airlines says the recovery trajectory in international air travel is “slower than initially expected” with industry forecasts currently expecting that it will take between two to four years for passenger traffic numbers to return to pre-pandemic levels.
SIA says that for planning purposes, they estimate that by the end of FY20/21, the Group’s passenger capacity may reach less than half of its pre-COVID-19 levels.
As such, the Singaporean national carrier says they are continuing to review the potential shape and size of their network over the longer term given COVID-19 and its impact on their passenger traffic and revenue, which will provide better clarity on the fleet size and mix that the Group will need.
This review is likely to lead to decisions being made around SIA’s fleet of 19 fuel-guzzling A380’s, which would account for approximately $1 billion with the airlines expecting to complete the review by the end of September.
Three of those Airbus A380’s along with six MAX 8s and 13 other narrow-body aircraft are currently stored in the NT desert at Alice Springs Airport.
The Group is working closely with industry groups to advocate the safe opening of borders for travel, with practical border health and safety measures. The recovery of air travel and air freight is a necessary catalyst for the recovery of global trade and economies severely impacted by Covid-19.
Finally, the airline says the integration of SilkAir into SIA remains on track. When flying does resume, SIA says customers will benefit from a step up to the Singapore Airlines inflight experience as they transition the SilkAir narrowbody operations to SIA, starting with the 737-800 aircraft, in Q4 FY20/21.
The integration of SilkAir into SIA will also deliver greater economies of scale for the Group, and allow it to deploy the right aircraft to meet the demand for air travel as it returns.
Hero Image: Steve Strike Photography