Thanks to the reopening of the economy and the pent-up demand of travellers, Singapore Airlines (SIA) is seeing some improvement in its earnings. Albeit still reporting a loss, SIA managed to narrow losses significantly in FY2022 ended March to $962.0 million from $4.27 billion in FY2021.

This came on the back of a 100% growth in total revenue to $7.6 billion from $3.8 billion a year ago.

During the period, SIA carried 3.9 million passengers in FY2022, up six-fold from a year before, while it ramped up passenger capacity (measured in available seat-kilometres) in a calibrated manner, growing from 24% of pre-Covid levels in April 2021 to 51% by the end of March.

Singapore's launch and subsequent expansion of the Vaccinated Travel Lane (VTL) scheme was the game changer for the group, boosting flight demands to and through Singapore. By deploying capacity and increasing services in an agile manner, SIA and Scoot were among the first to launch flights for all VTL points, allowing the carriers to capture the pent-up demand for air travel as it returned.

As a result, passenger flown revenue grew by 309.6% y-o-y to $2.8 billion. This was on the back of a 614.9% y-o-y growth in traffic (revenue-passenger kilometres), which outpaced the capacity expansion of 215.7% and resulted in the passenger load factor rising 16.8 percentage points (ppt) to 30.1%.

See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='/capital/results/ntuc-income-reports-premium-growth-fy2021-lower-net-operating-surplus-fair-value?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>NTUC Income reports premium growth for FY2021 but lower net operating surplus on fair value loss</a>

Cargo flown revenue reached a record $4.3 billion, representing a 60.2% y-o-y growth, driven by strong demand amid continued capacity constraints for both sea freight and air freight. This led to a 44.5% increase in loads carried, and 10.8% rise in yields.

Total expenditure grew by 30.0% y-o-y to $8.2 billion, which was mainly due to an increase in net fuel costs and non-fuel expenditure, as well as an offset of $292 million from the y-o-y impact of the fuel hedging ineffectiveness recorded last year, along with fair value changes on fuel derivatives.

Net fuel cost grew, mainly on higher fuel prices and an increase in volume uplifted, which was partially offset by a swing from a fuel hedging loss to a gain. The increase in non-fuel expenditure by 19.9% was well within the 215.7% increase in passenger capacity and the 50.1% increase in cargo capacity.

As at end-March, cash and cash equivalents stood at $13.8 billion.

See also: <a class='gtm_see_also_2_inread' style='text-decoration: underline;' href='/capital/results/serial-system-reports-lower-1qfy2022-earnings-allowance-obsolete-stocks?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>Serial System reports lower 1QFY2022 earnings on allowance for obsolete stocks</a>

Despite showing improvement, SIA is still in the red and hence in the view that it needs to conserve cash. With that, the board is not proposing a final dividend for FY2022.

Moving forward, SIA says that it is ready to ramp up operations and capture the returning demand for international air travel. Cabin crew recruitment has resumed after a two-year hiatus to replace staff who have left over the last two years. The group will also continue to make the necessary investment in its people to meet its growth plans. Aircraft utilisation is also increased to support network expansion.

SIA has also firmed up an order for seven Airbus A350F freighters to replace its fleet of Boeing 747-400Fs. Deliveries will begin in the fourth quarter of 2025, and SIA will be the first operator of this new-generation aircraft. The renewal of the freighter fleet reflects SIA’s continued investment in its key air cargo segment.

On May 18, shares in SIA have improved some 8.4% YTD to close at $5.43.

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Broker's Digest: ARAHT, SGX, Pan-United Corp, SIA, Credit Bureau Asia