The group recorded a 4.9% y-o-y net profit of $659 mil, but operating profit decreased 19.3% y-o-y. Photo: Bloomberg

Singapore Airlines (SIA) has reported a quarterly record revenue of $5.08 billion for the 3QFY2023/2024 ended Dec 31, 2023, as demand for air travel rebounded in China, Hong Kong, Japan and Taiwan.

The group says that this exceeded the $5 billion mark for the first time in its history.

For the full 9MFY2023/2024, the group recorded a revenue of $14.24 billion, up 7.2% y-o-y from the same period a year ago, driven by a 20.2% increase in passenger flown revenue and partially offset by a drop in cargo flown revenue.

The group recorded a 4.9% y-o-y increase in its net profit of $659 million, and a 35% y-o-y increase for the full 9MFY2023/2024 to a record $2.1 billion.

SIA says that this is mainly due to better operating performance, a net interest versus net finance charges, and share of profits versus a share of losses from associated companies the previous year.

However, expenditure increased by 9.3% y-o-y to $4.47 billion for the quarter, which included a $261 million increase, or 9.5% rise in non-fuel expenditure, and a $121 million increase, or 9.1% rise in net fuel cost.

This rise in net fuel cost was mainly due to the higher volume uplifted ($176 million), and a lower fuel hedging gain ($109 million), according to the group. This was partially offset by a 6.6% decrease in fuel prices, at $114 million.

As a result, SIA recorded a 19.3% y-o-y decrease in its operating profit for the 3QFY2023/2024 at $609 million, a decrease of $146 million from the previous year.

Group expenditure grew 7.2% y-o-y to $808 million, consisting of a $1.1 billion increase in non-fuel expenditure and a $292 million drop in net fuel cost. This net fuel cost fell to $3.7 billion, mainly due to a 22.0% drop in fuel prices that was partially offset by the higher volume uplifted and a lower fuel hedging gain.

SIA and Scoot carried 9.5 million passengers, up 29.4% y-o-y, while passenger traffic grew 19.1%, outpacing the capacity expansion of 17.9%. As a result, the group’s passenger load factor (PLF) improved by 0.8 percentage points to 88.2%.

As of Dec 31, 2023, SIA’s shareholders’ equity was $15.6 billion, down $4.3 billion from March 31, 2023. This was due to the partial redemption in June and December 2023 of the June 2021 Mandatory Convertible Bonds (MCBs) for $5.1 billion, including accrued yield.

Following the redemptions, 25% of the MCBs issued in June 2021 remain outstanding.

The group’s total debt balances decreased by $1.6 billion to $13.7 billion, mainly due to the repayment of borrowings. As a result, the group’s debt-equity ratio increased from 0.77 times to 0.88 times.

Updates on SIA’s fleet and initiatives

As at Dec 31, 2023, the group’s operating fleet comprised 202 passenger and freighter aircraft with an average age of seven years and one month. SIA added three Boeing 787-10s to its fleet in the third quarter, bringing its operating fleet to 143 passenger aircraft and seven freighters.

Scoot operated 52 passenger aircraft, and will take delivery of its first Embraer E190-E2 aircraft in April 2024. The group has 92 aircraft on order.

During this quarter, SIA reinstated services to Chongqing and Xiamen, while Scoot resumed flights to Kunming. With this, the Group operates to 23 destinations in China, compared to 25 points pre-pandemic. Scoot also resumed operations to Chennai, and restructured its direct flights to Athens and Berlin by operating three-times weekly Singapore-Athens-Berlin services.

For the Northern Summer 2024 operating season which will be from Mar 31 to Oct 26, SIA will ramp up services to Fukuoka and Nagoya from five-times weekly to daily. It will serve Milan with four-times weekly direct flights instead of the current twice-weekly operations.

SIA will also launch five-times weekly direct flights between Singapore and London (Gatwick) in June 2024, subject to regulatory approvals.

The group expects to return to pre-pandemic capacity levels within FY2024/FY2025.

SIA will have a 25.1% stake in an enlarged Air India Group once the proposed merger of Air India and Vistara is completed. It is pending foreign direct investment and other regulatory approvals.

This will bolster SIA’s presence in India, strengthen its multi-hub strategy, and allow it to continue participating directly in this large and fast-growing aviation market, says the group.

Last November, SIA and Scoot announced a target of replacing 5% of their total fuel requirements with sustainable aviation fuels by 2030.

Aviation and travel outlook

Although demand for air travel remains “healthy” in the last quarter of FY2023 and the first quarter of this year, SIA says that passenger yields continue to come under pressure from increased competition as capacity restoration continues across the industry.

“Heightened geopolitical tensions and economic uncertainty could also weigh on business sentiment and the demand for air travel. High fuel prices and inflationary pressures, as well as supply chain constraints, also present a more challenging operating cost environment globally for airlines,” says the group.

As air freight volume is expected to soften in the seasonally weaker January to March quarter, with continued pressure on yields as passenger aircraft bellyhold capacity continues to grow, SIA says it will continue to navigate these headwinds.

It will keep being nimble in matching capacity to demand, remaining alert to revenue and growth opportunities, and maintaining cost discipline.